Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes o No x.

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes o No x.

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No o.

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
in any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer. accelerated filer,
and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer o

Accelerated filer x

Non-Accelerated filer o

Smaller reporting company o

Indicate by checkmark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes o No x.

The aggregate market value of the voting stock of Bio-Reference
Laboratories, Inc. (consisting of Common Stock, $.01 par value) held by
non-affiliates of the registrant was approximately $297,400,000 based upon the
last sale price for the Common Stock on April 30, 2008, the last trading
date of the registrants most recently completed second quarter, as reported on
the NASDAQ Global Market System.

On January 5, 2009, there were 13,788,343 shares of Common Stock
issued and outstanding

PART I

Item. 1. - Business

Overview

We believe that we are the largest independent regional clinical
laboratory servicing the greater New York metropolitan area. We offer a
comprehensive list of laboratory testing services utilized by healthcare
providers in the detection, diagnosis, evaluation, monitoring and treatment of
diseases.

We currently process nearly 4.1 million requisitions each year. A
requisition form accompanies a patient specimen. It indicates the tests to be
performed and the party to be invoiced for the tests. Our clients include
doctors, employers, clinics and governmental units. We have a network of over
50 patient service centers for collection of patient specimens.

In 2006 we acquired GeneDx, a diagnostic genetic testing laboratory
providing services to national and international customers. GeneDx specializes
in testing for rare and complex genetic conditions through the use of DNA
sequencing. In 2007 we introduced the first commercially available genome-wide
oligonucleotide microarray analysis testing useful for the diagnosis of, among
other conditions, developmental disorders, which has significantly grown GeneDxs
business. The success and growth of GeneDx can be attributed to both the unique
nature of our testing and the highly experienced clinicians and researchers who
run the business.

In addition to our clinical testing operations, we operate a clinical
knowledge management service through our PSIMedica business unit. This system uses customer data from
laboratory results, pharmaceutical data, claims data and other data sources to
provide administrative and clinical decision support systems which enable our
customers to provide quality and efficient healthcare to their populations.

We also operate a web-based connectivity portal solution for
laboratories and physicians through our CareEvolve subsidiary. We use this
portal ourselves to provide laboratory ordering and results to our physician customers. We are also marketing this connectivity
solution to other laboratories throughout the country.

We are a New Jersey corporation. We may at times refer to ourselves and
our subsidiaries as the Company. We are the successor to Med-Mobile, Inc.,
a New Jersey corporation that was organized in 1981. Our executive offices are
located at 481 Edward H. Ross Drive, Elmwood Park, NJ 07407, telephone number:
201-791-2600.

The Clinical Laboratory Testing Market in the United States

We believe that the U.S. market for clinical laboratory testing
generates approximately $52 billion in annual revenue. Nearly all laboratory tests are performed by
one of three types of laboratories: hospital laboratories, physician office
laboratories or independent clinical laboratories. We believe approximately 55%
of the clinical laboratory tests done in the United States are currently
performed in a hospital laboratory, approximately 40% performed by an
independent clinical laboratory and the balance in a physician office or other
laboratory.

During the last few years, the economic fundamentals of the industry
have been improving. In the cost containment era of the 1990s, the industry was
negatively impacted by the rapid growth of managed care, stringent government
regulation and investigations into fraud and abuse. These factors led to
revenue and profit declines and industry consolidations, especially among
commercial clinical laboratories. As a result, fewer but larger clinical
laboratories have emerged with greater economies of scale, more effective
compliance with government billing regulation and other laws and a better
approach to pricing their services. These changes resulted in improved
profitability. In addition, new and emerging
technologies continue to provide greater testing opportunities for clinical
laboratories.

We believe the industry will continue to experience growth in testing
volume due to the following:

Aging of the population of the United States;

Awareness by patients of the value of laboratory tests;

Decrease in the cost of tests;

Decrease in the influence of managed care organizations on the ordering
patterns of their physicians;

Development of sophisticated and specialized tests for early detection
of disease and disease management;

Diagnosis and monitoring of infectious diseases such as AIDS and
Hepatitis C;

Early detection and prevention as a means of reducing healthcare costs;

Employer sponsored wellness programs;

Research and development in genomics.

Business Strategy

We are a regional clinical laboratory with subspecialty testing
capabilities. As a regional laboratory, we service the New York metropolitan
area, and currently conduct business in most New York State counties, as well
as in most of New Jersey and some parts of Pennsylvania and Connecticut. We
primarily offer laboratory services to physician offices in these areas with an
infrastructure that includes a comprehensive logistical department, extensive
phlebotomy services and phlebotomy draw stations scattered around our
geographic area. We have also developed expertise in certain testing areas with
specific emphasis in cancer pathology and diagnostics as well as molecular
diagnostics. These services are marketed as a business unit, called GenPath,
which services customers outside of routine physician office testing. Through
the acquisition of the operating assets of GeneDx, we have acquired expertise
and credibility in the area of genetic diagnostic testing and we intend to
leverage that resource in the development of expanded genetic diagnostic
testing. We have developed certain specialized markets, such as in the areas of
correctional health, substance abuse testing, fertility testing and molecular
diagnostics. Testing in these areas also may be supported outside of physician
offices.

We have one of the largest regional marketing staffs of any laboratory
in the country, some of whom are trained specifically in Oncology and call on
Oncology practices and hospitals.

We believe that our
large marketing staff and strong infrastructure within our designated area can
be leveraged to bring new technologies to physicians and healthcare providers.
Over the past year, our volume of testing in the area of molecular diagnostics
has increased. We believe that
laboratory data has great value in managing the healthcare of a population, but
can only be properly utilized when combined with medical claims and pharmacy
data. Our medical information unit, PSIMedica, seeks to combine laboratory data
with these other data elements in order to provide information analytics that
will help to improve the quality and efficiency of healthcare. We seek to
continue our strong growth not only through our marketing organization, new
technologies and superior service, but by providing value added analytics in
conjunction with laboratory results.

Our mission is to be recognized by our clients as the best provider of
clinical laboratory testing, information and related services. The principal
components of our strategy to achieve our mission are as follows:

Capitalize on our position within the clinical market

Lead in the providing of medical information

Provide the highest quality service

Pursue strategic growth opportunities

2

Services

The clinical laboratory testing business consists of routine testing and
esoteric testing. Routine testing generates approximately 50% and esoteric
testing generates approximately 50% of our net revenues. The net revenue
generated by our GeneDx and our CareEvolve subsidiaries were 3.94% and .82% in
fiscal 2007, respectively and 5.7% and .74% in fiscal 2008, respectively as a
percentage of total revenue.

Routine Testing

Routine tests measure various health parameters such as the functions of
the heart, kidney, liver, thyroid and other organs. Below is an abbreviated
list of some commonly ordered tests:

Blood Cell Counts

Cholesterol levels

HIV-related tests

Pap Smears

Pregnancy

Substance Abuse

Urinalysis

We perform these tests at our main processing facility in Elmwood Park,
New Jersey.

We operate 24 hours a day, 365 days a year. We perform and report most
routine tests within 24 hours. Tests results are delivered via driver or
electronically.

Esoteric Tests

We also perform esoteric tests that require sophisticated equipment and materials,
highly skilled personnel, professional attention and which are ordered less
frequently than routine tests. These tests are generally priced higher than
routine tests. Esoteric tests are usually in these medical fields:

Endocrinology (the study of glands and their hormone secretions)

Genetics (the study of chromosomes, genes and their protein products)

Immunology (the study of the immune system)

Microbiology (the study of microscopic forms of life)

Oncology (the study of abnormal cell growth)

Serology (the study of body fluids)

Toxicology (the study of chemicals and drugs and their effects on the
body)

Our PSIMedica business unit is based on a Clinical Knowledge Management
(CKM) System that uses data derived from various disparate sources to provide
both administrative and clinical analysis of a population. The source data
consists of enrollment (demographic) data, claims data, pharmacy data,
laboratory results data, and any other data that may be available. The system
uses sophisticated algorithms to cleanse and configure the data so that
analysis can be comprehensive and meaningful. The data is maintained on
multiple levels of analysis enabling review of data from the global level to
the granular transactional detail. The
system includes a base set of queries that provide basic functionality and
allows on-line real-time ad hoc query capability enabling the user to customize
analysis to the best needs of the organization using the system. In addition to
the basic queries provided by the system, PSIMedica Quality Indicators (PQI)
provide comprehensive, disease state oriented queries that disclose the quality
and efficiency of the care and service. These indicators have been designed to
provide the customer with standards and outcome predictors based on a medical
standards basis. We are using PSIMedica
to market value-added clinical laboratory services to bulk purchasers of
clinical laboratory solutions, as well as marketing our PSIMedica programs to
businesses such as Health Plans, Integrated Delivery Networks, Disease
Management Companies, Insurers, Clinical Trial Companies and other healthcare
providers that most benefit from the ability of the system to combine both
clinical and administrative analysis.

Other Products

CareEvolve, our wholly owned
subsidiary, is a physician-based connectivity portal. This system provides a complex, sophisticated
system for ordering laboratory services and delivering laboratory results. The system is designed to be physician-centric
and to provide a highly flexible, scalable, comprehensive desktop solution for
physicians to manage their day-to-day practice and personal needs, as well as
to handle their clinical laboratory ordering and reporting. This product has been designed to work as a
platform with plug and play capability that can easily be used by other
laboratories that also need a web-based solution for their physician customers.

Payors and Clients

We provide laboratory services to a range of healthcare providers. A payor
is the party who pays for the tests while the client is the party that refers
the tests to us. We may consider an organization that has a contract with us,
such as a clinic or governmental agency, both a payor and a client. Some
states, such as New York and New Jersey, prohibit us from billing physician
clients. During fiscal year 2008, no single client accounted for more than 10%
of our net revenues.

The following table reflects the current estimates of the breakdown of
net revenue by payor for the twelve months ended October 31, 2006, 2007,
and 2008.

October 31

2008

2007

2006

Direct Patient Billing

4

%

3

%

4

%

Commercial Insurance

47

%

46

%

44

%

Professional Billing

23

%

25

%

24

%

Medicare

24

%

24

%

26

%

Medicaid

2

%

2

%

2

%

100

%

100

%

100

%

3

Clients

Physicians who order clinical tests for their patients represent one of
the primary sources of our testing volume. Fees invoiced to patients and third
parties are based on our fee schedule, which may be subject to limitations on
fees imposed by third-party payors. Medicare and Medicaid reimbursements are
based on fee schedules set by governmental authorities.

Employers, Governmental Agencies

We provide laboratory services to governmental agencies and large
employer groups. We believe that we are the largest regional laboratory
providing laboratory testing services to correctional facilities in the
Northeastern United States. All of these clients are charged on a contractual
basis.

Sales and Marketing

We employ full and part-time sales and marketing representatives. All of
our sales and marketing personnel operate in a dual capacity, as both marketing
and client support representatives. This ensures that all of our salespersons
are intimately involved with the client. We believe that this is unique in the
industry and is extremely helpful in client retention, since it provides a
strong connection between the physician and our staff.

Client Service Coordinators

We utilize the services of full and part-time client service
coordinators at our Elmwood Park, Clarksburg and Gaithersburg facilities, all
of whom are trained in medical and laboratory terminology. This staff is used
as an interface with physicians and nurses and augments the client support
provided by our sales force. They also report highly abnormal and life
threatening results to the ordering physician immediately via telephone in
order to provide speedy medical resolution to any patient problem.

Logistical Support

We employ full and part-time couriers. They pick up patient specimens
from and deliver printed reports to physician offices, nursing homes, clinics
and correctional facilities.

Strategic Growth Opportunities

Over
the last several years, we have experienced substantial growth and have
expanded our operational capabilities. In September 2006, we acquired
certain assets and liabilities of two Maryland laboratories, a pathology
laboratory and a genetics laboratory for $1,500,000 and $10,000,000,
respectively. The genetics laboratory purchase agreement contains certain operational
targets, which, if achieved in the four years following the closing, could
result in an increase in the purchase price from $10,000,000 to a maximum
$17,000,000. During the recently completed fiscal year ended October 31,
2008 as well as for the fiscal year ended October 31, 2007, the genetics
laboratory achieved certain of the targets, entitling the prior owners to
receive $1,917,000 in cash and an additional 11,548 shares of our Common Stock
with respect to each such year. These amounts have been accrued and are
reflected in our financial statements. We retained the staffs of these
laboratories and continue to operate at the same locations. We intend to
develop further and expand both our core laboratory business and other
products. This growth and expansion has placed, and will continue to place, a
significant strain on our resources. We cannot assure that we will be able to
successfully manage a continuation of the rate of growth similar to that which
we have experienced in the past, should such growth occur.

Billing

Billing for laboratory services is extremely complicated. We must bill
various payors, such as patients, Medicare, Medicaid, insurance companies and
employer groups, all of which have different billing requirements. Compliance
with applicable laws and regulations as well as internal compliance procedures
adds complexity to this process.

Our bad debt expense is the result of issues that are not credit-related
as is the case in most industries. It is due in most part to missing or incorrect
billing information on our requisitions; this occurs because we depend on the
healthcare provider to supply us with the information. We perform the tests and
report the test results as requested on the requisition regardless of whether
the demographic information is correct or even missing altogether. We then
attempt to obtain any missing information and correct the billing information
received from the healthcare provider. This adds to the complexity, slows the
invoicing process, and generally increases the aging of our accounts
receivable. When all issues are not resolved in a timely manner, the item is
written-off to bad debt expense through the allowance for doubtful accounts.
Other items such as pricing differences and payor disputes also complicate
billing. Adjustments to receivables as a result of these types of matters are
accounted for as revenue adjustments and are not written-off to bad debt
expense.

Competition

We compete with three types of providers in a highly fragmented and
competitive industry: hospital laboratories, physician-office laboratories and
other independent clinical laboratories. Our major competitors in the New York
metropolitan area are Quest Diagnostics and Laboratory Corporation of America.
Although we are much smaller than these national laboratories, we believe that
we compete successfully with them in our region because of the following
factors:

Fewer layers of staff

A more responsive business atmosphere

Customized service

We believe our responses to medical consultation are faster and more
personalized than those of the national laboratories. Our client service staff
only deals with basic technical questions and those that have medical or
scientific significance are referred directly to our senior scientists and
medical staff.

Quality Assurance

Medical testing is
essentially a process of communication and data transfer. In order to provide
accurate and precise information to the physician, it is essential that we
maintain a well structured and vigorous quality assurance program. Our goal is
to continually improve this process. We hold the required Federal and State
licenses necessary to permit our operation of a clinical laboratory at our
facilities in New Jersey, New York, Maryland and Massachusetts. We submit to vigorous
proficiency tests (or surveys) in all tests that we perform. We are also
subject to unannounced inspections from the various state licensing agencies.

Our laboratories are accredited by the College of American Pathologists
(CAP). This accreditation includes on-site inspections and participation in
the CAP proficiency testing program or an equivalent. CAP is an independent
organization of board certified pathologists approved by the Center for
Medicare and Medicaid Services (CMS) to inspect clinical laboratories in
order to determine compliance with the standards required by the Clinical
Laboratory Improvement Amendments of 1988 (CLIA-88).

Our Quality Assurance Committee, headed by a Quality Assurance
Coordinator and composed of supervisors from all departments, meets daily to
assess and evaluate the laboratorys quality.
Based on the information received from the Committee, recommendations
are made to correct conditions which have led to errors. Management, department supervisors and
members of the Committee continually monitor the laboratorys quality.

4

Depending on the test, two or three levels of Quality Control materials
are run in each analytical assay to assure precision and accuracy. Patient population statistics are evaluated
each day. Testing of highly abnormal samples is repeated to assure accuracy.

We believe that all of these procedures are necessary, not only in
assuring a quality product, but also in maintaining Federal and state
licensing. These high standards of
quality are an important factor in what we regard as our excellent rate of
client retention.

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements other than statements of historical fact included in
this Report, including without limitation, statements regarding our financial
position, business strategy, products, products under development, markets,
budgets and plans and objectives of management for future operations, are
forward-looking statements. Although we believe that the expectations reflected
in such forward-looking statements are reasonable, we can give no assurance
that such expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from our expectations are
disclosed in statements set forth under the caption Risk Factors herein and
elsewhere in this Report, including, without limitation, in conjunction with
the forward-looking statements included in this Report. All subsequent written
and oral forward-looking statements attributable to us, or persons on our
behalf, are expressly qualified in their entirety by the enumerated Risk
Factors and such other statements.

Item 1A. Risk Factors

Because of the following factors, as well as of the factors affecting
our operating results and financial condition, financial performance should not
be considered to be a reliable indicator of future performance. Investors
should not use historical trends to anticipate results in future periods. See
also Special Note Regarding Forward Looking Statements.

Regulation of Clinical Laboratory Operations

The clinical laboratory industry is highly regulated and subjected to
significant Federal and state regulation. This includes inspections and audits
by governmental agencies. These agencies may impose fines, criminal penalties,
or other enforcement actions to enforce laws and regulations. These penalties
can include revocation of a clinical laboratorys license. Changes in
regulations may increase the cost of testing or processing claims.

Waste management is subject to Federal and state regulations governing
the transportation and disposal of medical waste including bodily fluids. Federal regulations require licensure of
interstate transporters of medical waste. In New Jersey, we are subject to the Comprehensive
Medical Waste Management Act, (CMWMA), which requires us to register as a
generator of special medical waste. All of our medical waste is disposed of by
a licensed interstate hauler. The hauler
provides a manifest of the disposition of the waste products as well as a
certificate of incineration which is retained by us. These records are audited
by the State of New Jersey on a yearly basis. We are also subject to Federal
requirements. The Federal Hazardous materials transportation law, 49 U.S.C.
5101 et seq., and the Hazardous Materials Regulations (HMR), 49 CFR parts
171-180. The Federal government has classified hazardous medical waste as
hazardous materials for the purpose of regulation. These regulations preempt
State regulation which must be substantively the same, the non-Federal
requirement must conform in every significant respect to the Federal
requirement. Editorial and other similar de minimis changes are permitted. 49
CFR 107.202(d). The amendments to provisions in 49 U.S.C., 5125 reaffirmed the
need to achieve greater uniformity and to promote the public health, welfare,
and safety at all levels, Federal standards for regulating the transportation
of hazardous materials in intrastate, interstate, and foreign commerce are necessary
and desirable. We believe we are in compliance with all Federal and State
medical waste regulations.

Regulation of Reimbursement for Laboratory Services

Containment of health-care costs, including reimbursement for clinical
laboratory services, has been a focus of ongoing governmental activity. Omnibus budget reconciliation legislation,
designed to reconcile existing laws with reductions and reimbursements
required by enactment of a Congressional budget can adversely affect clinical
laboratories by reducing Medicare reimbursement for laboratory services. For
most of the tests performed for Medicare beneficiaries or Medicaid recipients,
laboratories are required to bill Medicare or Medicaid directly, and to accept
Medicare or Medicaid reimbursement as payment in full.

The current administration, Congress and various Federal agencies have
examined the rapid growth of Federal expenditures for clinical laboratory
services, and the use by the major clinical laboratories of dual fee schedules
(client fees charged to physicians, hospitals, institutions and companies
with whom a laboratory deals on a bulk basis and which involve relatively low
administrative costs, and patient fees charged to individual patients and
third party payors, including Medicare, who generally require separate bills or
claims for each patient encounter and which involve relatively high
administrative costs). The permitted
Medicare reimbursement rate for clinical laboratory services has been reduced
by the Federal government in a number of instances over the past several years
to a present level equal to 74% of the national median of laboratory charges.
Calendar year 2008 marked the final year of a five-year freeze on Laboratory
fee updates, as required by the Medicare Modernization Act of 2003. A number of
proposals for legislation or regulation are under discussion which could have
the effect of substantially reducing Medicare reimbursements to clinical
laboratories through reduction of the present allowable percentage or through
other means. In addition, the structure
and nature of Medicare reimbursement for laboratory services is also under
discussion and we are unable to predict the outcome of these discussions.
Depending upon the nature of congressional and/or regulatory action, if any,
which is taken and the content of legislation, if any, which is adopted, we
could experience a significant decrease in revenues from Medicare and Medicaid,
which could have a material adverse effect on us. For the first time in five years, as of January 1,
2009, laboratories will receive a 4.5% across the board increase in
reimbursements.

CLIA-88

CLIA-88 extended
Federal licensing requirements to all clinical laboratories (regardless of the
location, size or type of laboratory), including those operated by physicians
in their offices, based on the complexity of the tests they perform. The legislation also substantially increased
regulation of cytology screening, most notably by requiring the Secretary of
Health and Human Services, (HHS) to implement regulations placing a limit on
the number of slides that a cytotechnologist may review in a twenty-four hour
period. CLIA-88 also established a more
stringent proficiency testing program for laboratories and increased the range
and severity of sanctions for violating Federal licensing requirements. A number of these provisions, including those
that imposed stricter cytology standards and increased proficiency testing,
have been implemented by regulations applicable only to laboratories subject to
Medicare certification. On February 28, 1992, HHS published three sets of
regulations implementing CLIA-88, including quality standard regulations
establishing Federal quality standards for all clinical laboratories;
application and user fee regulations applicable to most laboratories in the
United States which became effective on March 30 1993; and enforcement
procedure regulations applicable to laboratories that are found not to meet
CLIA-88 requirements. The quality
standard regulations establish varying levels of regulatory scrutiny depending
upon the complexity of testing performed.
Under these regulations, a laboratory that performs only one or more of
seventy eight routine waived tests may apply for a waiver from most
requirements of CLIA-88. We believe that
most tests performed by physician office laboratories will fall into either the
waived or the moderately complex category.
The latter category applies to simple or automated tests and generally
permits existing personnel in physicians offices to continue to perform
testing under the implementation of systems that insure the integrity and
accurate reporting of results, establishment of quality control systems,
proficiency testing by approved agencies, and biannual inspection. Our testing is often much more complex and as
a result, we are subject to full compliance with CLIA-88. The quality standard
and enforcement procedure regulations became effective on September 1,
1992, most personnel, quality control and proficiency testing requirements have
been implemented; the remainder will be phased in over a number of years. Our laboratory completed its first CLIA
inspection under CLIA-88 guidelines and received its certificate of compliance
effective February 7, 1996. It has been reinspected since on a bi-annual
basis and found to be in compliance.

5

Compliance Program

The Office of Inspector General has published a Model Compliance Program
for the clinical laboratory industry. This is a voluntary program for
laboratories to demonstrate to the Federal government that they are responsible
providers. We have implemented a voluntary compliance program adhering to the
standards set forth in the Model Compliance Program.

Confidentiality of Health Information

Pursuant to the Health Insurance Portability and Accountability Act of
1996 (HIPAA), on December 28, 2000, the Secretary of HHS issued final
regulations that would establish comprehensive federal standards with respect
to the use and disclosure of protected health information by a health plan,
healthcare provider or healthcare data clearinghouse. The regulations establish
a regulatory framework on various subject matter, including:

The circumstances under which disclosures and uses of protected health
information require the patients consent, or authorization or no patient
consent or authorization.

The content of notices of privacy practices for protected health data.

Patients rights to access, amend and receive an accounting of the
disclosures and uses of protected health information.

Administrative, technical and physical safeguards required for that use
or for disclosure of protected health data.

These regulations establish a minimum and would default to more
stringent state laws. Therefore, we are required to comply with both sets of
standards. Laboratories were required to submit a compliance plan to HHS by October 16,
2003. We filed our application for a one
year extension for compliance with the Transaction Data Set Regulations and
filed our compliance plan during the extension period in accordance with the
model form provided by HHS. HIPAA provides for significant fines as well as
substantial criminal penalties for violations of the Act.

Laboratory Developed Tests (LDTs)

Complex laboratories such as BioReference frequently develop testing
procedures to provide diagnostic results to customers for tests which are not
available using Federal Drug Administration (FDA) approved methods. These tests
have been traditionally offered by nearly all complex laboratories for the last
few decades. The FDA has been considering changes in the way laboratories are
allowed to offer these LDTs. While changes have been considered for some time
now, the potential for FDA involvement appears greater now than in the past.
Currently all such tests are conducted and offered under approval by CLIA and
individual state licensing procedures; the FDA is considering requiring FDA
approval on a portion of those currently non-FDA approved tests. There is an associated
risk for BioReference that some of the tests that it currently offers might
need to be subject to approval by the FDA; there are currently no formal
definitions, procedures or FDA processes on how such approvals would be
handled.

Fraud and Abuse Regulations

Medicare and Medicaid anti-kickback laws prohibit clinical laboratories
from making payments or furnishing other benefits to influence the referral of
tests billed to federal programs. Federal enforcement agencies (including both
the Federal Bureau of Investigation and the Office of the Inspector General)
liberally interpret and aggressively enforce statutory fraud and abuse
provisions of these anti-kickback statutes. According to public statements made
by the Department of Justice, healthcare fraud has become one of its highest
priorities. Many of the anti-fraud statutes are vague or indefinite and have
not been interpreted in the courts. We
believe we operate lawfully within these statutes; however, we cannot predict
if some of our practices may be interpreted as violating these statutes and
regulations.

Intellectual Property

BioReference, primarily through its wholly-owned subsidiary, GeneDx, but
additionally through its primary laboratory in Elmwood Park has in the past,
and may in the future, have the need to deal with intellectual property issues,
such as patent issues, trademark issues and copyright issues. BioReference
diligently researches all matters that may give rise to an intellectual
property issue and has taken substantial legal steps to make sure that all such
matters are fully considered and understood. In certain instances the issues
are not apparent and in some other cases, BioReference believes that the
current intellectual property law may not be appropriate to current conditions
or may be in a transitional state of change and BioReference may challenge the
law in such instances. There is an associated risk with such challenges that
could force BioReference to stop or change a testing procedure in certain
instances or could possibly result in financial expense as a result of the
Companys decision.

Insurance

We maintain professional liability insurance of $1,000,000 per
occurrence, $3,000,000 in the aggregate. In addition, we maintain excess
commercial insurance of $5,000,000 per occurrence and $5,000,000 in the
aggregate. We believe that our present insurance coverage is sufficient to
cover currently estimated exposures, but we cannot assure that we will not
incur liabilities in excess of the policy limits. In addition, although we believe that we will
be able to continue to obtain adequate insurance coverage, we cannot assure
that we will be able to do so at acceptable cost.

Employees

At October 31, 2008, we had 1,484 full-time and 423 part-time
employees serving in executive positions, as technicians and technologists
(including physicians, pathologists and PhDs), in marketing and as drivers and
in bookkeeping, clerical and administrative positions. None of our employees
are represented by a labor union. We regard relations with our employees as
satisfactory.

Risks Associated with Growth:

Over the last several years, we have experienced
substantial growth and have expanded our operational capabilities. In September 2006,
we acquired certain assets and liabilities of two Maryland laboratories, a
pathology laboratory and a genetics laboratory for $1,500,000 and $10,000,000,
respectively. The genetics laboratory purchase agreement contains certain
operational targets, which, if achieved in the next four years could result in
an increase in the purchase price from $10,000,000 to a maximum $17,000,000.
During the recently completed fiscal year ended October 31, 2008 as well
as for the fiscal year ended October 31, 2007, the genetics laboratory
achieved certain of the targets, entitling the prior owners to receive
$1,917,000 in cash and an additional 11,548 shares of our Common Stock with
respect to each such year. These amounts have been accrued and are reflected in
our financial statements. We retained the staffs of these laboratories and
continue to operate at the same locations. We intend to develop further and
expand both our core laboratory business and other products. This growth and
expansion has placed, and will continue to place, a significant strain on our
resources. We cannot assure that we will be able to successfully manage a
continuation of the rate of growth similar to that which we have experienced in
the past, should such growth occur.

Fluctuations in Operating Results:

Our quarterly and annual operating results can be affected by a wide
variety of factors, many of which are outside of our control and which have in
the past and could in the future materially and adversely affect our operating
results. These factors include the quantities and timing of specimens received,
pricing pressures, reimbursement changes, availability and cost of diagnostic
supplies, cost of logistic and delivery systems, changes in product mix,
retention and expansion of our marketing staff, timing of payments from
governmental agencies and third-party payors and the effect of adverse weather
conditions. We rely principally upon our internal logistic group for pick-up
and delivery of specimens. However, as we shift our product mix we have begun
to rely on Federal Express, UPS and other such providers for this service. Any
disruption in this service, as occurred on

6

September 11, 2001 when the National Airspace System (NAS) was
shut down for a week, could have a material adverse effect on our operating
results. As a result of these factors, our operating results may continue to
fluctuate in the future.

Uncertainties Related to Government Regulation and Enforcement

We are a provider of healthcare services. As such, we are subject to
extensive and rapidly changing federal, state and local laws and regulations
governing licensure, billing practices, financial relationships, referrals,
conduct of operations, purchase of existing businesses and other aspects of our
business. We cannot predict the timing or impact of any changes in these laws
and regulations or their interpretations by regulatory bodies, and we cannot
assure that these changes will not have a material adverse effect on us.

Current federal laws governing federal healthcare programs, as well as
some state laws, regulate certain aspects of the relationship between
healthcare providers, including us, and their referral sources. The Federal
Anti-Kickback Law and the Stark Law generally prohibit providers and others
from soliciting, offering, receiving or paying, directly or indirectly, any
monies in return for either making a referral for a service or item or
purchasing, ordering or leasing a service or item, and prohibits physicians
from making such referrals to entities in which they have an investment
interest or with which they have a compensation arrangement. Exceptions to
these laws are limited. Violations are punishable by disallowance of claims,
civil monetary or criminal penalties and or exclusion from Medicare. Government
authorities (both federal and state) have become more aggressive in examining
laboratory billing practices, and in seeking repayments and even penalties
based on how the services were billed, regardless of whether the carriers had
furnished clear guidance.

In addition, our laboratory operations are required to be licensed or
certified under CLIA-88, CMS (Medicare) and various State and local laws. We
are also subject to federal and state laws relating to the handling and
disposal of medical waste and radioactive materials, as well as the safety and
health of laboratory employees. Although we seek to structure our practices to
comply with these laws and regulations, no assurances can be given regarding
compliance in any given situation. The possible sanctions for failure to comply
with these laws and regulations may include the denial to conduct business,
significant fines and criminal penalties. Any significant fine or criminal
penalty could have a material adverse effect on our financial condition. Any
exclusion or suspension from participation in a CMS program, any loss of
licensure or accreditation or the inability to obtain the required license
would have a material adverse effect on our business.

Uncertainties Related to Third-Party Payors

We typically bill third party payors such as Medicare, Medicaid,
Governmental programs and private insurers for our services. Such third party
payors are constantly negotiating prices with the goal of lowering their costs,
which may result in lower profit margins for us. Reimbursement rates have been
established for most, but not every service. We cannot collect from third party
payors for services that these payors have not approved for reimbursement. As
is common with all laboratories, there is a certain amount of variability with
respect to reimbursement among third party payors. Furthermore, third party
payors have, on occasion ceased reimbursements when certain tests are ordered
for patients with certain diagnoses while maintaining reimbursement when those
tests are ordered for other diagnoses deemed appropriate by the carrier. In
addition, Medicare or Medicaid may retroactively audit its payments to us and
may determine that certain payments must be returned.

Potential Healthcare Reform Including Decreasing Reimbursement Rates

The public and the federal government continue
to focus attention on reforming the healthcare system in the United States. At
the beginning of calendar year 2005, CMS announced significant cuts to Medicare
reimbursement rates for flow cytometry testing. We benefited from a partial restoration
of the former reimbursement rates in fiscal 2007. Furthermore, several
legislative proposals have been introduced in Congress and state legislatures
in recent years that would effect major reforms of the healthcare systems. In
addition, CMS has made a number of proposals regarding the payment and coverage
of laboratory services including the development of national coverage policies.
Because of the uncertainties in regard to the nature, timing and extent of any
such reimbursement changes, audits and reform initiatives, we are unable to
predict the effect of these changes on us. For the first time in five years, as
of January 1, 2009, laboratories will receive a 4.5% across the board
increase in reimbursements.

Uncertainties Related to Accounts Receivable

All of our services are rendered based upon a fee for services list. We
assume the financial risk related to collection of these receivables such as:

Delays attendant to reimbursement by third party payors

Difficulties in gathering complete and accurate billing information

Inability to collect accounts

Long collection cycles

There have been times when our accounts receivable have increased at a
greater rate than revenue growth and, therefore, has adversely affected our
cash flow from operations. We have taken steps to implement systems and
processing changes intended to improve billing procedures and related
collection results. We believe that we have made progress by reorganizing our
accounts receivable and billing functions and that our allowance for doubtful
accounts is adequate. However, we cannot assure that our ongoing assessment of
accounts receivable will not result in the need for additional provisions. Such
additional provisions, if implemented, could have a material adverse effect on
our operating results.

Competition

We operate in a business which is characterized by intense competition.
Our major competitors in the New York metropolitan area, Quest Diagnostics and
Laboratory Corporation of America, are large national laboratories which
possess greater name recognition, larger customer bases, significantly greater
financial resources and employ substantially more personnel than we do. Many of
our competitors have long established relationships. We cannot give assurances
that we will be able to compete successfully with such entities in the future.
Our ability to attract and retain sales representatives and management may also
affect our ability to compete in this marketplace.

In
May 2008, the Company entered into an amended revolving note payable loan
agreement with PNC Bank, N.A. (the bank). The maximum amount of the
credit line available to the Company pursuant to the loan agreement is the
lesser of (i) $40,000,000 or (ii) 50% of the Companys qualified
accounts receivable [as defined in the agreement]. The amendment to the
Loan and Security Agreement provides for interest on advances to be subject to
the banks prime rate or the Eurodollar rate of interest plus, in certain
instances, an additional interest percentage. The additional interest
percentage charges on Eurodollar borrowings range from 1% to 4% and are
determined based upon certain financial ratios achieved by the Company.
At October 31, 2008, the Company had elected to have all of the total
advances outstanding to be subject to the banks prime rate of interest of
4.0%. The credit line is collateralized
by substantially all of the Companys assets. The line of credit is available
through October 2012 and may be extended for annual periods by mutual
consent, thereafter. The terms of this agreement contain, among other
provisions, requirements for maintaining defined levels of capital
expenditures, fixed charge coverage, and the prohibition of the payment by the
Company of cash dividends. As of October 31, 2008, the Company was
utilizing $18,831,000 of the available credit under this revolving note payable
loan agreement.

7

Effective
as of October 31, 2007, we executed a fifth amendment to the loan
agreement formalizing the repayment terms of a $5 million term loan from PNC
Bank used by our wholly-owned subsidiary, BRLI No. 2 Acquisition Corp. to
fund the $5 million acquisition Cash Payment in connection with the purchase of
the operating assets of GeneDx. The term loan is evidenced by a secured
promissory note payable over a six year term in equal monthly principal
payments of $69,000, plus interest at an annual rate of 6.85%. The
balance on this note as of October 31, 2008 was approximately $3,333,000.

In
January 2007, the Company issued a ten year term note of $4,100,000 for
the financing of equipment. The note is payable in equal monthly
installments of $47,000 including principal and interest, with payment
commencing on March 1, 2007 at an effective interest rate of 6.63% per
annum. The balance on this note as of October 31, 2008 was
approximately $3,564,000.

Dependence on our Chief Executive Officer

Our success is substantially dependent on the efforts and abilities of
Marc D. Grodman, M.D., our founder,
president and chief executive officer. The unavailability of Dr. Grodman,
whether as a result of his death, disability or otherwise, could have a
material adverse effect upon our business.

Possible Volatility of Stock Price

There is a history of volatility in the market price for shares of
companies in the healthcare marketplace. Factors such as fluctuations in our
quarterly revenues and operating results, announcements of new innovations or
services by us or our competitors, changes in third party payment policies and
government regulations may have a material effect on the market price of our
Common Stock. In addition, any announcement of a material pending legal action
could have a negative impact on the market price of our Common Stock regardless
of the outcome of any such matter.

Factors In Place To Discourage Takeover Attempts

The substantial percentage ownership of our outstanding Common Stock by
our executive officers and directors; our charter provision providing for a
staggered board of directors so that only one-third of the board is elected
each year to serve a three year term; and the requirement that the holders of
not less than 80% of our outstanding Common Stock must approve any merger,
consolidation, asset sale or acquisition of the Company not approved by the
board of directors may discourage attempts by third parties to tender for or
otherwise obtain control of the Company, even if such an attempt might be
deemed beneficial to the Company and its shareholders. See Item 11  Employment
Agreements with Executive Officers as to employment agreements signed by the
Company which provide for substantial Severance Payments upon termination of
employment in the event of a Change in Control of the Company. These Severance
Payment provisions may also discourage attempts by third parties to tender for
or otherwise obtain control of the Company.

Item 1B. Unresolved Staff Comments

The Company has received a comment letter from the staff (the Staff)
of the Securities and Exchange Commissions regarding its periodic and current
reports under the Exchange Act. Two of the comments have not yet been resolved.

The first comment related to the provision in the GeneDx acquisition
agreement which required the stock portion of the upside contingent purchase
price to be valued at the value per share of the closing date stock value (i.e.
$21.65 per share). The Staff contends that the value of the stock portion of
the upside contingent purchase price payments should be determined based on its
fair value when the contingency is resolved. It is the Companys position that
any revaluation of the stock portion of the upside contingent purchase price
payment would be quantitatively insignificant and would have no material effect
on the Companys financial statements.

The second comment requested an analysis to support the Companys
position that segment reporting is not required for its GeneDx and CareEvolve
operations. The Company is in the process of responding to this comment. The
Companys position is that the threshold levels have not been exceeded requiring
segment reporting for these two operations. GeneDxs and CareEvolves revenues
in fiscal 2007 were less than 4% and 1% and in fiscal 2008, less than 6%, and
1%, respectively, of the Companys consolidated revenues. In addition,
BioReference and GeneDx basically provide laboratory testing services to the
same class of customers and must meet similar regulatory requirements. The
Company also believes that GeneDx and BioReference have other similar economic
characteristics so that separate segment reporting for GeneDx is not required.

Item 2. - Properties

We operate through a regional network of laboratories. The table below
summarizes certain information as to our principal facilities as of October 31,
2008.

Location

Purpose

Type of
Occupance

Clarksburg, MD

Pathology
Laboratory

Leased

Elmwood Park, NJ

Main
Laboratory

Leased

Elmwood Park, NJ

Corporate
Headquarters

Leased

Gaithersburg, MD

Genetics
Laboratory

Leased

Milford, MA

Oncology
Laboratory

Leased

Poughkeepsie, NY

Pathology
Laboratory

Leased

We believe that each of these facilities as presently equipped has the
production capacity for its currently foreseeable level of operations. We also
lease additional relatively small draw stations throughout the New York
metropolitan area to collect specimens from physician-referred patients for
testing at our processing facilities.

Item 3. - Legal Proceedings

At October 31, 2008 and at the date of this Report, we were
not involved in any material legal proceedings.

Item 4. - Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of our security holders during
the fourth quarter of fiscal 2008.

Our Common Stock is listed
for trading on The NASDAQ Global Market System under the symbol BRLI. It
traded on the NASDAQ Small Cap System from November 24, 1993 until March 26,
2002 when our application to list our Common Stock on the NASDAQ Global Market
System was approved.

The following table sets
forth the range of high and low closing bid prices for our Common Stock for the
periods indicated, as derived from reports furnished by Pink Sheets LLC. Such
quotations represent prices between dealers, do not include mark-ups,
mark-downs or commissions and may not necessarily represent actual transactions.

Fiscal Year

Bid Prices

2007

First Quarter

$

25.56

$

21.96

Second Quarter

26.95

23.49

Third Quarter

28.41

24.66

Fourth Quarter

35.10

26.09

2008

First Quarter

$

35.21

$

26.92

Second Quarter

28.99

23.95

Third Quarter

25.81

20.64

Fourth Quarter

30.71

20.48

On January 9, 2009 the
last sale price for the Common Stock on NASDAQ was $23.57 per share.

At October 31, 2008, the
number of record owners of the Common Stock was 342. Such number of record
owners was determined from our shareholder records and does not include
beneficial owners whose shares are held in nominee accounts with brokers,
dealers, banks and clearing agencies.

Dividends

We have not paid any
dividends on our Common Stock since our inception and, do not contemplate or
anticipate paying any dividends in the foreseeable future. Furthermore, our
loan agreement with PNC Bank prohibits us from paying any cash dividends or
making any cash distributions with respect to shares of our Common Stock.

Recent Sales of Unregistered
Securities

On September 26, 2006 we
issued 230,947 shares of our Common Stock in connection with the acquisition of
the operating assets of GeneDx. These shares were valued for the purpose of
this acquisition at $21.65 per share, the average closing price for the Common
Stock on NASDAQ on the ten trading days immediately preceding the August 29,
2006 signing of the purchase agreement. An additional 11,548 shares of our
Common Stock were issued to the prior owners of GeneDx in December 2007,
as a result of GeneDx achieving certain operating results during the first
annual measuring period following the closing of the acquisition. In December 2008 an additional 11,548
shares of our common stock were issued to the prior owners of GeneDx, as a
result of GeneDx achieving certain operating results during the second annual
measuring period following the closing of the acquisition.

A restrictive legend was
placed on the certificates for the 230,947 shares and each of the 11,548 share
installments and stop transfer instructions were issued against the shares. The
sellers represented that they were acquiring the stock for investment and not
with a view to distribution. The shares were issued in reliance upon the
exemption from the registration requirements of the Securities Act of 1933 in
accordance with Section 4(2) of the Act on the basis that the
transaction did not involve a public offering.

Equity Compensation Plan Information

The information required
under this item is disclosed in item 12 of this Annual Report on Form 10-K
and is incorporated herein by reference.

Issuer Purchases of Equity Securities

On October 31, 2007 the June 1,
2005 Board of Directors Authorization for the repurchase of up to 500,000
shares of the Companys common stock expired.
No shares had been repurchased under this plan.

On July 14, 2008 the
Board of Directors authorized a repurchase of up to 1,000,000 shares of the
Companys common stock over the period ending October 31, 2010. As of October 31, 2008 the Company
repurchased 19,700 shares at a cost of approximately $452,000. The shares were
canceled upon repurchase

We are a clinical laboratory
located in northeastern New Jersey. Our regional footprint lies within the New
York City metropolitan area and the surrounding areas of New Jersey and
southern New York State as well eastern Pennsylvania and some areas of western
Connecticut; under certain circumstances, we provide services further into New
York State, Pennsylvania, Delaware and Maryland. As a regional provider, we are
a full-service laboratory that primarily services physician office practices;
our drivers pick up samples and deliver reports and supplies, we provide
sophisticated technical support, phlebotomy services or patient service centers
where appropriate, and electronic communication services in many cases. We have
also developed a national reputation for our expertise in certain focused areas
of clinical testing. GenPath, the label under which we provide our cancer and
oncology services, is recognized for the superior hematopathology services it
provides throughout the country. Physicians outside of our regional footprint
send samples to our laboratory in order to take advantage of the expertise that
we are able to provide in blood-based cancer pathology and associated
diagnostics. Our correctional healthcare services are used throughout the
country at prisons and jails. The focused markets we serve on a national basis
outside of our regional footprint do not require many of the logistical and
other ancillary support services required within the region. Even within our
regional footprint, we provide the same services that we provide on a national
basis as well as some regional focused diagnostic services, such as histology
and pathology support services, substance abuse testing, fertility testing,
hemostasis testing, womens health testing, and molecular diagnostics that are
unavailable from many of the smaller regional competitors; testing in some of
these areas may be provided outside of physician offices.

Over the last few years,
there have been fundamental changes in the laboratory services industry. In the
1990s, the industry was negatively impacted by the growth of managed care,
increased government regulation, and investigations into fraud and abuse. These
factors led to revenue and profit declines and industry consolidations,
especially among commercial laboratories. There are currently only three
publicly-traded full service laboratories operating in the U.S. While that
means that the two national mega-laboratories and BioReference Laboratories are
the only remaining publicly traded full service commercial laboratories, there
are numerous hospital outreach programs and smaller reference laboratories that
compete for the commercial clinical laboratory business scattered throughout
the country. Clinical laboratories have had to improve efficiency, leverage
economies of scale, comply with government regulations and other laws and
develop more profitable approaches to pricing. Moreover, there has been a
proliferation of technology advancements in clinical diagnostics over the last
decade that has created significant opportunities for new testing and growth.

As a full service clinical
laboratory, we are constantly looking for new technologies and new
methodologies that will help us to grow. Since the turn of the century, our
size alone has made us attractive to companies that are driving the advances in
technology. We represent a significant opportunity for these companies to
market their products in one of the major population centers of the worldthe
New York Metropolitan area. We have had several successful strategic
relationships with such technology opportunities. In addition to new technology
opportunities, we have an extremely seasoned and talented management staff that
has been able to identify emerging laboratory markets that are under-served or
under-utilized. We are currently developing programs for cardiology, histology
and womens health to go along with our existing hemostasis, hematopathology
and correctional healthcare initiatives which have already been established and
in which we have been increasing our market share for the past several years.
We will continue to vigilantly seek focused diagnostic marketing opportunities
where we can provide information, technology, service or support that expand
and grow our clinical laboratory.

During the fourth quarter of
fiscal 2006, the Company acquired the operating assets of GeneDx, a leading DNA
sequencing laboratory. As molecular
testing in general becomes a more significant element in the diagnostic testing
industry, the Company believes that genetic testing will become an essential
diagnostic tool of the future. GeneDx
was started by two geneticists from the NIH in 2000. Over the next six years, based on the
reputation and expertise of the founders and the outstanding team they built
around themselves, along with a very focused and dedicated understanding of the
science of genetics, GeneDx became known as one of the premier genetic testing
laboratories for the diagnosis of rare genetic diseases. The Company believed that the promise of
genetic testing is in the diagnosis of the genetic variants of common
diseases. It is the Companys intention
to leverage the expertise and reputation of GeneDx in order to take a
leadership role in the expanding area of genetic testing. The Company is seeking cutting edge methods
of testing that will be commercially viable diagnostic tools for the advancement
of genetic testing. During the past year, GeneDx introduced GenomeDx, a new
test based on CGH Array technology, a high-speed, chip-based technology, that
has allowed GeneDx to move to the forefront of an emerging technology platform.
The Company is already expanding the menu of tests offered and employing
marketing techniques that were extremely successful in building GenPath, our
oncology laboratory. In addition to
scientists and technicians to manage testing, GeneDx employs several genetic
counselors to help patients and referring physicians and geneticists understand
the meaning of the test results. Prior
to the acquisition, GeneDx s revenues and profits were increasing at an
accelerating rate. This increase has continued through fiscal 2008.

10

While we recognize that we are a clinical
laboratory that processes samples, we also understand that we are an
information company that needs to effectively communicate the results of our
efforts back to healthcare providers. Laboratory results play a major role in
the implementation of physician healthcare. Laboratory results are used to
diagnose, monitor and classify health concerns. In many cases, laboratory
results represent the confirming data in diagnosing complicated health issues.
Since laboratory results play such an important role in routine physician care,
we have developed informatics solutions that leverage our role in healthcare.
We needed to build a web-based solution to quickly, accurately, conveniently
and competitively collect ordering information and deliver results, so we built
an internal solution that we call CareEvolve. That solution has been essential
to our own operations. We license the technology to other laboratories
throughout the country which they utilize to more effectively compete against
the national laboratories. These other laboratories licensing our technology
are not out competitors since they are outside our regional footprint.

We have also created our PSIMedica business
unit which has developed a Clinical Knowledge Management (CKM) System that
takes data from enrollment, claims, pharmacy, laboratory results and any other
available electronic source to provide both administrative and clinical
analysis of a population. The system uses proprietary algorithms to cleanse and
configure the data and transfer the resulting information into a healthcare
data repository. Using advanced cube technology methodologies, the data can be
analyzed from a myriad of views and from highly granular transactional detail
to global trended overview. Events such as the Katrina disaster in Louisiana
two summers ago and general pressures from the government have made development
of an electronic medical record system and Pay-for Performance reimbursement
priority goals in the healthcare industry. A large portion of an individuals
medical record consists of laboratory data and a key performance indicator in
any Pay-for-Performance initiative is laboratory result data. Our CKM system is
a mature, full functioning solution that will allow us to play a role in these
important national initiatives.

To date, neither our PSIMedica business unit
nor CareEvolve has produced significant revenues.

Results of Operations (In thousands, except
per patient data)

Fiscal Year 2008 Compared to 2007

NET REVENUES:

Net Revenues for the year ended October 31,
2008 were $301,071 as compared to $250,431 for the year ended October 31,
2007; this represents an 20% increase in net revenues. This increase is due to
an 11% increase in patients serviced and a 9% increase in net revenue per
patient. Our laboratory operations had net revenues of $298,543 in fiscal 2008.

The number of patients serviced during the
year ended October 31, 2008 was 4,085, which was 11% greater when compared
to the prior fiscal year. Net revenue per
patient for the year ended October 31, 2008 was $73.09 compared to net
revenue per patient for the year ended October 31, 2007 of $67.14, an
increase of $5.95 or 9% as a result of increases in esoteric testing.

COST OF SERVICES:

Cost of Services for the year ended October 31,
2008 was $153,831 as compared to $124,029 for the year ended October 31,
2007, an increase of 24%. This increase is related to the increase in net
revenues of 20%. Reagent, laboratory and medical supplies increased at a year
over year rate of 25% reflecting a significant increase in the more expensive
tests that we offer from payers who reimburse at lower rates than our
traditional business trends. In addition, phlebotomy salaries increased 35%
when compared to the prior comparable period. Also, pick-up and delivery
vehicle operating expenses (energy related costs) continued to have an impact
on cost of services. As energy prices subside, we expect to see this categorys
impact reduced during the coming fiscal year.
We have introduced some new testing platforms and methodologies over the
last year and have seen a modest research and development increase in the cost
of introducing new tests.

GROSS PROFIT:

Gross profit on net revenues increased to
$147,240 for the year ended October 31, 2008 from $126,402 for the year
ended October 31, 2007; an increase of $20,838 (16%), primarily
attributable to the increase in net revenues. Gross profit margins decreased by
1% during the current fiscal yar driven by increased expenses outlined above.

GENERAL AND ADMINISTRATIVE
EXPENSES:

General and
administrative expenses for the year ended October 31, 2008 were $118,683
as compared to $101,345 for the year ended October 31, 2007, an increase
of $17,338 or 17%. This increase is 3% less than the increase in net revenues
and includes moderate increases to our marketing and sales expenses.

INTEREST
EXPENSE:

Interest expense
decreased from $2,410 during the year ended October 31, 2007 to $2,135
during the year ended October 31, 2008; a decrease of $275. This decrease
is due to a decrease in utilization and in the interest rates on the PNC Bank
line of credit, acquisition debt and capital leases. Management believes that
this trend will continue in the near term due to the decrease in interest
rates.

NET INCOME:

We realized net income of $15,617 for the
twelve month period ended October 31, 2008 as compared to $13,957 for the
twelve month period ended October 31, 2007, an increase of 12%.

Pre-tax income for the period ended October 31,
2008 was $26,691, as compared to $22,907 for the period ended October 31,
2007, an increase of $3,784 (17%) and was caused primarily by an increase in
direct expenses in relation to an increase in net revenues. The provision for income taxes increased from
$8,950 for the period ended October 31, 2007, to $11,074 for the current
twelve month period.

Results of Operations (In thousands, except
per patient data)

Fiscal Year 2007 Compared to 2006

NET REVENUES:

Net Revenues for the year ended October 31,
2007 were $250,431 as compared to $193,134 for the year ended October 31,
2006; this represents an 30% increase in net revenues. This increase is due to
an 20% increase in patients serviced and a 8% increase in net revenue per
patient. Our laboratory operations had net revenues of $247,031, in fiscal
2007.

The number of patients serviced during the
year ended October 31, 2007 was 3,681, which was 20% greater when compared
to the prior fiscal year. Net revenue
per patient for the year ended October 31, 2007 was $67.14 compared to net
revenue per patient for the year ended October 31, 2006 of $61.95, an
increase of $5.19, or 8% as a result of increases in esoteric testing.

COST OF SERVICES:

Cost of Services for the year ended October 31,
2007 was $124,029 as compared to $96,079 for the year ended October 31,
2006, an increase of 29%. This increase is related to the increase in net
revenues of 30%. However, reagent, laboratory and medical supplies increased at
a year over year rate of

11

38% reflecting a significant increase in the
more expensive tests that we offer from payers who reimburse at lower rates
than our traditional business trends. This is in a large part the result of
changes in managed care contracts in the New York Metropolitan area that
enabled the Company to grow substantially in revenues.

GROSS PROFIT:

Gross profit on net revenues increased to
$126,402 for the year ended October 31, 2007 from $97,055 for the year
ended October 31, 2006; an increase of $29,347 (30%), primarily
attributable to the increase in net revenues. Gross profit margins remained
constant at 50% since both revenues and expenses increased 30%.

GENERAL AND ADMINISTRATIVE
EXPENSES:

General and
administrative expenses for the year ended October 31, 2007 were $101,345
as compared to $79,074 for the year ended October 31, 2006, an increase of
$22,271 or 28%. This increase is related to the increase in net revenues of 30%

INTEREST
EXPENSE:

Interest expense
increased from $1,412 during the year ended October 31, 2006 to $2,410
during the year ended October 31, 2007; an increase of $998. This increase
is due to increased utilization of our line of credit, the acquisition of our
genetics laboratory and capital lease acquisitions. Management believes that
this trend may continue in the future due to the continued use of our revolving
line of credit to fund our growth.

NET INCOME:

We realized net income of $13,957 for the
twelve month period ended October 31, 2007 as compared to $11,291 for the
twelve month period ended October 31, 2006, an increase of 24%.

Pre-tax income for the period ended October 31,
2007 was $22,907, as compared to $16,742 for the period ended October 31,
2006, an increase of $6,165 (37%) and was caused primarily by a decrease in
expenses in relation to an increase in net revenues. The provision for income taxes increased from
$5,451 for the period ended October 31, 2006, to $8,950 for the current
twelve month period.

Liquidity and Capital
Resources (Dollars
in thousands except for the $5 million term loan, the equipment financing loan,
and their repayment terms as well as the GeneDx contingent payments)

For the Fiscal Year
Ended October 31, 2008

Our working capital at October 31, 2008
was approximately $58,561 as compared to approximately $48,747 at October 31,
2007, an increase of $9,814. Our cash position increased by approximately $799
during the current period. We decreased our short term borrowing by
approximately $4,421 and repaid approximately $3,800 in existing debt. We had
current liabilities of approximately $60,990 at October 31, 2008. We
generated approximately $19,000 in cash from operations, an increase of
approximately $13,000 as compared to the year ended October 31, 2007.

Accounts receivable, net of allowance for
doubtful accounts, totaled approximately $93,718 at October 31, 2008, an
increase of approximately $7,700 from October 31, 2007, or 9%. This
increase was primarily attributable to increased revenue. Cash collected over the twelve month period ended
October 31, 2008 increased 26% over the prior twelve month period.

Net service revenues on the statements of
operations are as follows:

Years Ended
October 31

2008

2007

2006

Gross Revenues

$

1,039,030

$

779,953

$

522,117

Contr. Adjustments and Discounts

737,959

529,522

328,983

Net Revenues

301,071

250,431

193,134

Percent of Contractual Adjustments and
Discounts To Gross Revenues

71.0

%

67.9

%

63.0

%

The table above illustrates the relationship
between contractual adjustments and gross revenues for the fiscal years 2008,
2007, and 2006. Between 2007 and 2008, contractual adjustments increased
approximately 310 basis points. The most significant factor in this increase
was the increase in market share caused by the acquisition of contracts with
low reimbursement third party payors.

Credit risk with respect to accounts
receivable is generally diversified due to the large number of patients
comprising our client base. We have
significant receivable balances with government payors and various insurance
carriers. Generally, we do not require
collateral or other security to support customer receivables. However, we
continually monitor and evaluate our client acceptance and collection
procedures to minimize potential credit risks associated with our accounts
receivable and to establish an allowance for uncollectible accounts. As a
consequence, we believe that our accounts receivable credit risk exposure
beyond such allowance is not material to the financial statements.

A number of proposals for legislation continue
to be under discussion which could substantially reduce Medicare and Medicaid
reimbursements to clinical laboratories.
Depending upon the nature of regulatory action, and the content of
legislation, we could experience a significant decrease in revenues from
Medicare and Medicaid, which could have a material adverse effect on us. We are
unable to predict, however, the extent to which such actions will be
taken. For the first time in five years,
as of January 1, 2009, laboratories will receive a 4.5% across the board
increase in reimbursements.

12

LABORATORY GROSS RECEIVABLES BY PAYOR GROUP

FY 2008

30
DAYS

%

60
DAYS

%

90
DAYS

%

>90
DAYS

%

TOTAL

%

Self Pay

$

3,655

20

%

$

2,930

16

%

$

2,627

14

%

$

9,114

50

%

$

18,326

100

%

Medicare

19,019

54

%

5,360

15

%

1,921

5

%

8,861

25

%

35,161

100

%

Medicaid

3,721

28

%

2,841

22

%

2,312

18

%

4,325

33

%

13,199

100

%

Pro Bill

10,275

63

%

1,702

10

%

1,834

11

%

2,484

15

%

16,295

100

%

Comm. Ins

53,022

51

%

18,263

18

%

8,111

8

%

24,363

23

%

103,759

100

%

Total

$

89,692

48

%

$

31,096

17

%

$

16,805

9

%

$

49,147

26

%

$

186,740

100

%

FY 2007

30
DAYS

%

60
DAYS

%

90
DAYS

%

>90
DAYS

%

TOTAL

%

Self Pay

$

2,621

19

%

$

1,818

13

%

$

1,548

11

%

$

7,952

57

%

$

13,939

100

%

Medicare

14,197

47

%

4,091

13

%

2,293

8

%

9,943

33

%

30,524

100

%

Medicaid

3,379

24

%

2,486

17

%

2,374

17

%

6,139

43

%

14,378

100

%

Pro Bill

9,128

60

%

2,466

16

%

558

4

%

3,187

21

%

15,339

100

%

Comm. Ins

42,431

42

%

14,582

14

%

11,236

11

%

33,839

33

%

102,088

100

%

Total

$

71,756

41

%

$

25,443

14

%

$

18,009

10

%

$

61,060

35

%

$

176,268

100

%

Billing for laboratory services is complicated
and we must bill various payors, such as the individual, the insurance company,
the government (federal or state), the private company or the health clinic.
Other factors that may complicate billing include:

Differences between fee
schedules and reimbursement rates.

Incomplete or inaccurate
billing information as provided by the doctor.

Disparity in coverage and
information requirements.

Disputes with payors.

Internal and external
compliance policies and procedures.

Significant costs are incurred as a result of
our participation in government programs since billing and reimbursement for
laboratory tests are subject to complex regulations. We perform the requested
tests and report the results whether the information is correct or not or even
missing. This adds to the complexity and slows the collection process and
increases the aging of our accounts receivable (A/R). When patient invoices
are not collected in a timely manner the item is written off to the allowance.

Days Sales Outstanding (DSO) for fiscal
years 2007 and 2008 were 115 and 107, respectively, a decrease of approximately
7%. These changes are exaggerated by our primary marketplace, the physician
office marketplace. However, when you compare our DSO lag to our collectible
net revenues as reported on our financial statements for the periods in
question, it varies between 98% to 102%, depending on the period.

Overall, the components of A/R as shown above
for the two most recently completed fiscal years under review have not varied
much year over year. The percent of A/R over 90 days has decreased to 26% as of
October 31, 2008 as compared to 35% as of October 31, 2007.

In
May 2008, the Company entered into an amended revolving note payable loan
agreement with PNC Bank, N.A. (the bank). The maximum amount of the
credit line available to the Company pursuant to the loan agreement is the
lesser of (i) $40,000 or (ii) 50% of the Companys qualified accounts
receivable [as defined in the agreement]. The amendment to the Loan and
Security Agreement provides for interest on advances to be subject to the banks
prime rate or the Eurodollar rate of interest plus, in certain instances, an
additional interest percentage. The additional interest percentage
charges on Eurodollar borrowings range from 1% to 4% and are determined based
upon certain financial ratios achieved by the Company. At October 31,
2008, the Company had elected to have all of the total advances outstanding to
be subject to the banks prime rate of interest at 4.0%. The credit line is collateralized by
substantially all of the Companys assets. The line of credit is available
through October 2012 and may be extended for annual periods by mutual
consent, thereafter. The terms of this agreement contain, among other
provisions, requirements for maintaining defined levels of capital
expenditures, fixed charge coverage, and the prohibition of the payment by the
Company of cash dividends. As of October 31, 2008, the Company was
utilizing $18,831 of the available credit under this revolving note payable
loan agreement.

Effective
as of October 31, 2007, we executed a fifth amendment to the loan
agreement formalizing the repayment terms of a $5 million term loan from PNC
Bank used by our wholly-owned subsidiary, BRLI No. 2 Acquisition Corp. to
fund the $5 million acquisition Cash Payment in connection with the purchase of
the operating assets of GeneDx. The term loan is evidenced by a secured
promissory note payable over a six year term in equal monthly principal
payments of $69, plus interest at an annual rate of 6.85%. The Balance on
this note as of October 31, 2008 was approximately $3,333.

In January 2007, the Company issued a ten
year term note of $4,100 for the financing of equipment. The note is
payable in equal monthly installments of $47 including principal and interest,
with payment commencing on March 1, 2007 at an effective interest rate of
6.63% per annum. The balance on this note as of October 31, 2008 was
approximately $3,564.

In September 2006, we acquired certain
assets and liabilities of two Maryland laboratories, a pathology laboratory and
a genetics laboratory for $1,500,000 and $10,000,000, respectively. The
genetics laboratory purchase agreement contains certain operational targets,
which, if achieved in the four years following the closing, could result in an
increase in the purchase price from $10,000,000 to a maximum $17,000,000.
During the recently completed fiscal year ended October 31, 2008 as well
as for the fiscal year ended October 31, 2007, the genetics laboratory
achieved certain of the targets, entitling the prior owners to receive
$1,917,000 in cash and an additional 11,548 shares of our Common Stock with
respect to each such year. These amounts have been accrued and are reflected in
our financial statements.

The weighted average interest rate on
short-term borrowings outstanding as of October 31, 2008 and 2007 was
approximately 5.35% and 7.39%, respectively.

13

We intend to expand our laboratory operations
through aggressive marketing while also attempting to diversify into related
medical fields through acquisitions.
These acquisitions may involve cash, notes, Common Stock, and/or combinations
thereof.

Tabular Disclosure of
Contractual Obligations

Payments Due By Period

(Dollars in thousands)

Total

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013
and thereafter

Long-Term Debt

$

6,904

$

1,180

$

1,194

$

1,217

$

1,243

$

2,069

Capital Leases

$

5,732

$

2,469

$

1,807

$

1,051

$

405

$

-0-

Operating Leases

$

2,829

$

2,294

$

455

$

62

$

14

$

5

Purchase Obligations

$

49,691

$

17,042

$

15,153

$

9,432

$

6,446

$

1,618

Long-Term Liabilities under Employment and
Consultant Contracts

$

12,622

$

3,976

$

3,568

$

3,069

$

1,469

$

540

Total

$

77,778

$

26,961

$

22,177

$

14,831

$

9,577

$

4,232

Our cash balances at October 31, 2008
totaled approximately $12,696 as compared to approximately $11,897 at October 31,
2007. We believe that our cash position,
the anticipated cash generated from future operations, and the
availability of our credit line with PNC Bank, will meet our anticipated
cash needs in fiscal 2008. However, we will be making an approximately two
million dollar payment to the prior owners of GeneDx during the first quarter
of fiscal year 2009. Therefore, we have approximately $10,700 in cash and
approximately $21,200 of credit availability through our PNC credit line.

We do not have any off-balance sheet items.

Impact of Inflation

To date, inflation has not had a material
effect on our operations.

New Authoritative Pronouncements

In
May 2008, the FASB issued two new Financial Accounting Standards No. 162
The Hierarchy of Generally Accepted Accounting Principles and No. 163 Accounting
for Financial Guarantee Insurance Contractsan interpretation of FASB Statement
No. 60. FAS #162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). This Statement is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The
Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles. This statement is not expected to have a material
impact on the reporting of our results of operations. FAS #163 is primarily
geared towards financial guarantee insurance contracts by insurance
enterprises. It is not expected to have any material effect on the
reporting of our results of operations.

In
March 2008 the FASB issued Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activitiesan amendment of FASB
Statement No. 133. This statement is effective for all interim
periods beginning November 15, 2008. This Statement changes the
disclosure requirements for derivative instruments and hedging
activities. This statement is not expected to have a material impact on
the reporting of our results of operations.

In
December 2007 the FASB issued FAS 141(R) Business Combinations
and FAS 160 Noncontrolling Interests in Consolidated Financial Statements
These statements are effective for fiscal years, and interim periods within those
fiscal years in the case of FAS 160, beginning on or after December 15,
2008. Earlier adoption is prohibited. Together these statements revise the
accounting rules with respect to accounting for business combinations.

Specifically,
the objective of FAS 141(R) is to improve the relevance, representational
faithfulness and comparability of the information that the reporting entity
provides in its financial reports about a business combination and its effects.
This statement thus establishes principles and requirements for how the
acquirer:

·Recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree

·Recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase

·Determines what information to disclose to enable
users of the financial statements to evaluate the nature and financial effects
of the business combination.

The
objective of FAS 160 is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require:

·The ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented in
the consolidated statement of financial position within equity, but separate
from the parents equity.

14

·The amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income.

·Changes in a parents ownership interest while the
parent retains its controlling financial interest in its subsidiary be
accounted for consistently. A parents ownership interest in a subsidiary
changes if the parent purchases additional ownership interests in its
subsidiary or if the parent sells some of its ownership interests in its
subsidiary. It also changes if the subsidiary reacquires some of its ownership
interests or the subsidiary issues additional ownership interests. All of those
transactions are economically similar, and this Statement requires that they be
accounted for similarly, as equity transactions.

·When a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. The gain or loss on the deconsolidation of the subsidiary is
measured using the fair value of any noncontrolling equity investment rather
than the carrying amount of that retained investment.

·Entities provide sufficient disclosures that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners.

Together
these statements are not currently expected to have a significant impact on the
entitys consolidated financial statements. A significant impact may however be
realized on any future acquisition(s) by this Company. The amounts of such
impact can not be currently determined and will depend on the nature and terms
of such future acquisition(s), if any.

Critical Accounting Policies

The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reported periods.

Accounting for Goodwill

We evaluate the recoverability and measure the
possible impairment of goodwill under SFAS 142, The impairment test is a
two-step process that begins with the estimation of the fair value of the
reporting unit. The first step screens for potential impairment and the second
step measures the amount of the impairment, if any. Managements estimate of fair value considers
publicly available information regarding our market capitalization as well as (i) publicly
available information regarding comparable publicly-traded companies in the
clinical laboratory testing industry, (ii) the financial projections and
future prospects of our business, including its growth opportunities and likely
operational improvements, and (iii) comparable sales prices, if available.
As part of the first step to assess potential impairment, management compares
the estimate of fair value to book value on a consolidated net assets
basis. If the book value of the
consolidated net assets is greater than the estimate of fair value, we then
proceed to the second step to measure the impairment, if any. The second step compares the implied fair
value of goodwill with its carrying value

The implied fair value is determined by allocating
the fair value of the reporting unit to all of the assets and liabilities of
that unit as if the reporting unit had been acquired in a business combination
and the fair value of the reporting unit was the purchase price paid to acquire
the reporting unit. The excess of the
fair value of the reporting unit over the amounts assigned to its assets and
liabilities is the implied fair value of goodwill. If the carrying amount of the goodwill is
greater than its implied fair value, an impairment loss will be recognized in
that period.

Accounting for Intangible and Other Long-Lived
Assets

We evaluate the possible impairment of our
long-lived assets, including intangible assets. We review the recoverability of
our long-lived assets when events or changes in circumstances occur that
indicate that the carrying value of the asset may not be recoverable. Evaluation of possible impairment is based on
our ability to recover the asset from the expected future pretax cash flows
(undiscounted and without interest charges) of the related operations. If the
expected undiscounted pretax cash flows are less than the carrying amount of
such asset, an impairment loss is recognized for the difference between the
estimated fair value and carrying amount of the asset.

Accounting for Revenue

Service revenues are principally generated
from laboratory testing services including chemical diagnostic tests such as
blood analysis, urine analysis and genetic testing among others. Net service
revenues are recognized at the time the testing services are performed and are
reported at their estimated net realizable amounts. These estimated net
realizable amounts from patients, third party payors and others for services
rendered, are accrued on an estimated basis in the period the related services
are rendered and adjusted in subsequent periods based upon an analysis of the
Companys collection experience from each category of payor group as well as
prospectively determined contractual adjustments and discounts with third party
payors. Differences between these adjustments and any subsequent revisions are
included in the statement of operations in which the revisions are made and are
disclosed, if material. Applying this methodology and aggregating its
collection experience from all payor groups, the Company has not been required
to record an adjustment related to revenue recorded in prior periods that was
material in nature.

Accounting for Contractual Credits and
Doubtful Accounts

An allowance for contractual credits and
discounts is estimated by payor group and determined based upon a review of the
reimbursement policies and subsequent collections from the different types of
payors. The Company has not been required to record an adjustment in a
subsequent period related to revenue recorded in a prior period that was
material in nature.

Accounting for Employment Benefit Plan

The Company sponsors a 401(k) Profit-Sharing
Plan [the Plan]. Employees become
eligible for participation after attaining the age of eighteen and completing one
year of service. Participants may elect
to contribute up to ten percent of their compensation, as defined in the Plan
Adoption Agreement, to a maximum allowed by the Internal Revenue Service. The Company may choose to make a matching
contribution to the plan for each participant who has elected to make
tax-deferred contributions for the plan year, at a percentage determined each
year by the Company. The Company elected to make a matching contribution which
amounted to $457,544 for 2008, $359,177 for 2007, and $225,971 for 2006. The
Employer contribution will be fully vested after the third year of service.

15

Forward Looking Statements

This Annual Report on Form 10-K contains
historical information as well as forward-looking statements. Statements
looking forward in time are included in this Annual Report pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such statements involve known and unknown risks and uncertainties that may
cause our actual results in future periods to be materially different from any
future performance suggested herein.

The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the reported amounts
of revenues and expenses during the reporting period. While many aspects of our
business are subject to complex federal, state and local regulations, the
accounting for our business is generally straightforward. Our revenues are primarily comprised of a
high volume of relatively low dollar transactions, and about 42% of all our
costs consist of employee compensation and benefits. Revenues are recognized at the time the services
are performed and are reported at the estimated net realizable amounts from
patients, third-party payors and others for services rendered including
prospectively determined adjustments under reimbursement agreements with
third-party payors. These adjustments
are accrued on an estimated basis in the period the services are rendered and
adjusted in future periods as final settlements are determined. These estimates are reviewed and adjusted, if
warranted, by senior management on a monthly basis. We believe that our estimates and assumptions
are correct; however, several factors could cause actual results to differ
materially from those currently anticipated due to a number of factors in
addition to those discussed under  Risk Factors as well as elsewhere herein
including:

our failure to integrate
newly acquired businesses (if any) and the costs related to such integration.

our failure to obtain and
retain new customers and alliance partners, or a reduction in tests ordered or
specimens submitted by existing customers.

adverse results from
investigations of clinical laboratories by the government, which may include
significant monetary damages and/or exclusion from the Medicare and Medicaid
programs.

loss or suspension of a
license or imposition of a fine or penalties under, or future changes in, the
law or regulations of CLIA-88, or those of Medicare, Medicaid or other federal,
state or local agencies.

changes in federal, state,
local and third party payor regulations or policies (or in the interpretation
of current regulations) affecting governmental and third-party reimbursement
for clinical laboratory testing (such as the decrease in Medicare reimbursement
for Flow Cytometry testing at the beginning of calendar year 2005 described
above under Cautionary Statements).

failure to comply with the
Federal Occupational Safety and Health Administration requirements and the
recently passed Needlestick Safety and Prevention Act.

failure to comply with HIPAA,
which could result in significant fines as well as substantial criminal
penalties.

changes in payor mix.

failure to maintain our days
sales outstanding levels.

increased competition,
including price competition.

our ability to attract and
retain experienced and qualified personnel.

adverse
litigation results.

liabilities
that result from our inability to comply with new corporate governance
requirements.

failure
to comply with the Sarbanes-Oxley Act of 2002.

Item 7A. - Quantitative and Qualitative
Disclosures about Market Risk

We do not invest in or trade market
risk sensitive instruments. We also do not have any foreign operations or
foreign sales so that our exposure to foreign currency exchange rate risk is
non-existent.

We do have exposure to both
rising and falling interest rates. At October 31, 2008, advances of
approximately $18,831,000 under our Loan Agreement with PNC Bank were subject
to interest charges at the Banks then prime rate of 4.0 %.

We estimate that our monthly
cash interest expense at October 31, 2008 was approximately $177,000 and
that a one percentage point increase or decrease in short-term rates would
increase or decrease our monthly interest expense by approximately $16,000.

See Note 5 to the
Consolidated Financial Statements contained herein.

Item 8. - Financial Statements and
Supplementary Data

Financial Statements are
annexed hereto

Item 9. - Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

None

Item
9A. - Controls and Procedures

An evaluation was carried out under the supervision and with the
participation of our management, including our principal executive officer and
principal financial officer, of the effectiveness of the design and operation
of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act as of the end of the period covered by
this report. Based upon that evaluation, our principal executive officer and
principal financial officer concluded that those disclosure controls and
procedures were effective to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commissions rules and forms.

The management of Bio-Reference Laboratories, Inc. (the Company),
including its Chief Executive Officer and Chief Financial Officer, is
responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934. The Companys internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America. Internal control
over financial reporting includes policies and procedures that:

· pertain
to the maintenance of records that, in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;

· provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures of the Company are being made only in accordance with
authorization of management and directors of the Company; and

· provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of assets that could have a material effect on
the consolidated financial statements.

Management assessed the effectiveness of the Companys internal control
over financial reporting as of October 31, 2008. Management based this
assessment on criteria for effective internal control over financial reporting
described in Internal Control  Integrated

16

Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Managements assessment included an evaluation of the design of the
Companys internal control over financial reporting and testing of the
operating effectiveness of its internal control over financial reporting.

Based on this assessment, management has determined that the Companys
internal control over financial reporting as of October 31, 2008 is effective.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. MSPC, Certified Public Accountants and
Advisors, a Professional Corporation, an independent registered public
accounting firm, has audited our internal control over financial reporting and
has expressed an unqualified opinion on the effectiveness of internal control
over financial reporting as of October 31, 2008.

Item
9B. - Other Information

None.

17

PART III

Item 10.- Directors, Executive Officers and Corporate Governance

The following table sets forth certain information with respect to each
of the directors and executive officers of the Company.

Name

Age

Position

Marc
D. Grodman, M.D.

57

Chairman
of the Board, President, Chief Executive Officer and Director

The Audit Committee is
comprised of the four non-employee members of the Board of Directors, Gary
Lederman (Chairman), Joseph Benincasa, John Roglieri and Harry Elias. The Board
of Directors deems each such individual as independent as defined by the rules of
the National Association of Securities Dealers. The Audit Committee met four
times during fiscal year 2008. The Audit Committee confers with the Companys
auditors and reviews, evaluates and advises the Board of Directors concerning
the adequacy of the Companys accounting systems, its financial reporting
practices, the maintenance of its books and records and its internal controls.
In addition, the Audit Committee reviews the scope of the audit of the Companys
financial statements and the results thereof. The Board of Directors has
determined that Gary Lederman is qualified to serve as the Companys audit
committee financial expert as defined in Regulation S-K promulgated by the
SEC.

The Compensation Committee is comprised of four non-employee members of
the Board of Directors, John Roglieri (Chairman), Joseph Benincasa, Harry Elias
and Gary Lederman. The Compensation Committee met once during fiscal year 2008.
The Compensation Committee reviews salaries, cash bonuses and compensation
plans for the Companys executive officers and eligible employees and makes
recommendations concerning same to the Board of Directors.

The Company does not have an Executive Committee. Officers are elected
by and hold office at the discretion of the Board of Directors.

The Nominating Committee is
comprised of the four non-employee members of the Board of Directors, Harry
Elias, Joseph Benincasa, Gary Lederman and John Roglieri. Pursuant to its
charter, the Nominating Committees role is to establish criteria for the
selection of directors; to identify individuals qualified to be directors; to
evaluate director candidates proposed by stockholders; to recommend individuals
to fill vacancies on the Board and to recommend nominees for director at each
annual stockholder meeting. The Nominating Committee may consider nominees for
director of the Company submitted in writing c/o the Committee at the Companys
executive offices, whether by executive officer of the Company; current
directors of the Company, search firms (if any) engaged by the Committee, and,
in the circumstances provided below, shall consider nominees for director
proposed by a stockholder. Information with respect to the proposed nominee
must be provided in writing by the stockholder addressed to the Committee at
the Companys executive offices, and received not less than 90 nor more than
120 days prior to the anniversary date of the prior years annual meeting,
provided that if the current years annual meeting is not scheduled to be held
within 30 days of the anniversary date of the prior years annual meeting,
notice from a stockholder shall be considered timely if it is received not
later than the tenth day following the date on which the notice of the annual
meeting was mailed or the date on which public disclosure of the date of the
annual meeting was made, whichever occurs first. The information shall include
the name of the nominee, and such information with respect to the nominee as
would be required under the rules and regulations of the Securities and
Exchange Commission to be included in the Companys Proxy Statement if the
proposed nominee were to be included therein. In addition, the stockholders
notice shall also include the class and number of shares the stockholder owns,
a description of all arrangements and understandings between the stockholder
and the proposed nominee, a representation that the stockholder intends to
appear in person or by proxy at the meeting to nominate the person named in its
notice, a representation as to whether the stockholder intends to deliver a
proxy statement to or solicit proxies from shareholders of the Company and
information with respect to the stockholder as would be required under the rules and
regulations of the Securities and Exchange Commission to be included in the
Companys Proxy Statement.

The Nominating Committee generally identifies potential candidates for
director by seeking referrals from the Companys management, members of the
Board of Directors and their various business contacts. Candidates are
evaluated based upon factors such as independence, knowledge, judgment, integrity,
character, leadership, skills, education, experience, financial literacy,
standing in the community and ability to foster a diversity of backgrounds and
views and to complement the Boards existing strengths. There are no
differences in the manner in which the Committee will evaluate nominees for
director based on whether the nominee is recommended by a stockholder.

Code of Ethics

The Company has adopted a Code of Ethics that applies to its executive
officers and to key financial and accounting personnel. The Company will, upon
a stockholders written request to Investor Relations, c/o the Company, furnish
a paper copy of the Code of Ethics.

The following is a brief account of the business experience of each
director and executive officer of the Company.

Marc D. Grodman, M.D. founded the Company in December 1981 and has
been its Chairman of the Board, President, Chief Executive Officer and a
Director since its formation. Dr. Grodman is an Assistant Professor of
Clinical Medicine at Columbia Universitys College of Physicians and Surgeons
and Assistant Attending Physician at Presbyterian Hospital, New York City. From
1980 to 1983, Dr. Grodman attended the Kennedy School of Government at
Harvard University and was a Primary Care Clinical Fellow at Massachusetts
General Hospital. From 1982 to 1984, he was a medical consultant to the Metal
Trades Department of the AFL-CIO. Dr. Grodman received a B.A. degree from
the University of Pennsylvania in 1973 and an M.D. degree from Columbia
Universitys College of Physicians and Surgeons in 1977. Except for his part time duties as Assistant
Professor of Clinical Medicine and Assistant Attending Physician at Columbia
University and Presbyterian Hospital, Dr. Grodman devotes all of his
working time to the business of the Company.

18

Since January 2005, Dr. Grodman has been a member of the Board
of Directors, and since April 2008, Chairman of the American Clinical
Laboratory Association, an industry organization comprised of the largest and
most significant commercial clinical laboratories in the United States. Other
Board members include the chief executive officers of Quest Diagnostics and
Laboratory Corporation of America.

Howard Dubinett has been the Executive Vice-President and Chief
Operating Officer of the Company since its formation in 1981. He became a
Director of the Company in April 1986. Mr. Dubinett attended Rutgers
University. Mr. Dubinett devotes all of his working time to the business
of the Company.

Sam Singer has been the
Companys Vice President and Chief Financial Officer since October 1987
and a Director since November 1989.
He is responsible for all of the Companys financial activities. Mr. Singer
was the Controller for Sycomm Systems Corporation, a data processing and
management consulting company, from 1981 to 1987, prior to joining the
Company. He received a B.A. degree from
Strayer University and an M.B.A. from Rutgers University. Mr. Singer devotes all of his working
time to the business of the Company.

Joseph Benincasa became a
Director of the Company in June 2005. Mr. Benincasa currently serves
as the Executive Director of The Actors Fund of America, a position he has
held since 1989. The Actors Fund is the leading national, non-profit human
services organization providing comprehensive social and health care services,
employment, training and housing support to the entertainment profession. It is
headquartered in New York City with regional offices in Chicago and Los
Angeles. He is a director of St. Peters University Medical Center and also
sits on the board of directors of Broadway Cares/Equity Fights AIDS; the
National Theatre Workshop of the Handicapped; Career Transition for Dancers;
the Times Square Alliance; the New York Society of Association Executives and
the Somerset Patriots, a minor league baseball team. Mr. Benincasa holds a
B.A. degree from St. Josephs University and an M. Ed. Degree from Rutgers
University. He also attended Fordham University Graduate School of Business.

Harry Elias became a Director of the Company in March 2004. Mr. Elias
commenced his employment in sales and marketing with JVC Company of America (JVC)
in 1967, subsequently being appointed as JVCs Senior Vice President of Sales
and Marketing in 1983 and as Executive Vice President of Sales and Marketing in
1990. In 1995, Mr. Elias was named as JVCs Chief Operating Officer, a
position he occupied until April 2003 when he resigned his positions upon
his appointment as JVCs Honorable Chairman. JVC, a distributor of audio and
video products headquartered in Wayne, New Jersey is the wholly owned United
States subsidiary of Victor Company of Japan, a manufacturer of audio and video
products headquartered in Japan. In January 2005, after retiring from JVC,
Mr. Elias was appointed Chairman of the Board of and commenced to serve as
a consultant to AKAI USA, the sole distributor in the United States of
electronic products produced by AKAI, a Chinese manufacturer. Mr. Elias
retired from AKAI in 2007 and currently is self-employed as a Business
Consultant.

Gary Lederman, Esq. became a Director of the Company in May 1997.
He received his B.A. degree from Brooklyn College in 1954 and his J.D. degree
from NYU Law School in 1957. He was
manager of Locals 370, 491 and 662 of the U.F.C.W. International Union from
1961 to 1985. He is retired from the unions and has been a lecturer at
Queensboro Community College in the field of insurance. He served on an
institutional review board for RTL, a pharmaceutical drug testing laboratory
until his retirement in February 2007.

John Roglieri, M.D. became a
Director of the Company in September 1995.
He is an Assistant Professor of Clinical Medicine at Columbia Universitys
College of Physicians and Surgeons and an Assistant Attending Physician at
Presbyterian Hospital, New York City. Dr. Roglieri
received a B.S. degree in Chemical Engineering and a B.A. degree in Applied
Sciences from Lehigh University in 1960, an M.D. degree from Harvard Medical
School in 1966, and a Masters degree from Columbia Universitys School of
Business in 1978. From 1969 until 1971,
he was a Senior Assistant Surgeon in the U.S. Public Health Service in
Washington, D.C.. From 1971 until 1973
he was a Clinical and Research Fellow at Massachusetts General Hospital. From 1973 until 1975, he was Director of the
Robert Wood Johnson Clinical Scholars program at Columbia University. In 1975 he was appointed Vice-President, Ambulatory
Services at Presbyterian Hospital, a position which he held until 1980. Since 1980, he has maintained a private
practice of internal medicine at Columbia-Presbyterian Medical Center. From 1988 until 1992, he was also Director of
the Employee Health Service at Presbyterian Hospital. From 1992 through 1999, Dr. Roglieri
was the Corporate Medical Director of NYLCare, a managed care subsidiary of New
York Life Insurance Company (New York Life). Dr. Roglieri was chief
medical officer of Physician WebLink, a national physician practice management
company, from 1999 to 2000. Since 2001, he has been a Medical Director for New
York Life in Manhattan. He is a member of advisory boards to several
pharmaceutical companies, a member of the Editorial Advisory Board of the
journals Managed Care and Seminars in Medical Practice, and is a subject of
biographical record in Whos Who in America.

There are no family relationships between
or among any directors or executive officers of Bio-Reference Laboratories. The
Companys Certificate of Incorporation provides for a staggered Board of Directors
pursuant to which the Board is divided into three classes of directors and the
members of only one class are elected each year to serve a three-year term. Mr. Benincasa,
Mr. Lederman and Dr. Roglieri are the Class III directors whose
term expires in fiscal 2009. Dr. Grodman and Mr. Dubinett are the Class I
directors whose term expires in fiscal 2010.

Key Personnel and Consultants

The following key personnel and consultants make significant
contributions to the Companys operations.

James Weisberger, M.D. (Age 53) joined the Company in September 2003
as Vice President, Assistant Chief Medical Officer and Director of
Hematopathology. He is currently employed as the Companys Chief Medical
Officer. Prior to joining the Company, he was Director of Hematopathology at
IMPATH, Inc. (1999-2003). He is
board certified in internal medicine, anatomic and clinical pathology, and
hematopathology. He has a New York State Department of Health Certificate of
Qualification as a Laboratory Director. He is a Clinical Assistant Professor of
Pathology at New York Medical College, Valhalla, New York. Prior to joining IMPATH, he was an Assistant Professor of Medicine and
Pathology at New York Medical College (1995-1999). He has a B.S. degree from Stanford University
(1977); an M.S. degree from Stanford University (1978); and an M.D. degree from
the University of Pennsylvania (1983).

Charles T.
Todd, Jr. (Age 57) is a
Senior Vice President engaged in Sales. Mr.
Todd was the founder and CEO of GenCare Biomedical Research Corporation (GenCare),
a specialty oncology laboratory that was purchased by the Company in 1995. He attended Seton Hall University from where
he received a B.S. degree in Finance in 1974.

Richard Faherty (Age 62) serves as the Companys
Chief Information Officer and oversees the Companys two informatics
operations. Mr. Faherty provided custom programming and system analysis
services to GenCare from 1987 until its acquisition by the Company in 1995. He
became a consultant to the Company in 1995 in the information technology area
and an employee in 1999. Mr. Faherty is a graduate of the University of
Notre Dame (1968) and the Fordham Law School (1975).

John W.
Littleton (Age 48) joined the Company in September 2002 as a Vice
President engaged in Sales. Prior to
joining the Company, Mr. Littleton was Vice President of Sales for
Specialty Laboratories and the Northeast Regional Vice President of Sales for
Quest Diagnostics. He received a B.A..
degree from Seton Hall University in 1983.

John Bennett, M.D., Scientific Advisory Board
Chairman, is Professor Emeritus at the University of Rochester Medical Center,
Rochester, New York. Dr. Bennett
has long been recognized as an intellectual force in the treatment and
understanding of leukemias, lymphomas and other cancer-related diseases. He established the French-American-British
(FAB) Leukemia Working Group and is one of the worlds leading authorities on
Myelodysplasia. He is founder and
Chairman of the MDS Foundation, as well as Editor of the Journal of Leukemia
Research. Dr. Bennett is currently Professor Emeritus and former Head of
the Medical Oncology Unit at the University of Rochester Medical Center and
formerly was a Professor of Oncology in Medicine, Pathology and Laboratory
Medicine at the University of Rochester Medical School. For nearly four decades, Dr. Bennett
has been honored by the medical community as an expert in the field of oncology
as evidenced by the numerous chairs he has held in prestigious societies and
committees and his authorship of more than 400 publications in peer review
journals, the majority of which are in the area of hematologic

19

malignancies.
Dr. Bennett earned his B.A. from Harvard University and his M.D.
from Boston University. He served his residency in medicine at Beth-Israel
Hospital, Boston, Massachusetts and completed a fellowship in hematology at
Boston City Hospital. He headed the Morphology and Cytochemistry Section of
the Clinical Center at the National Institute of Health (NIH) before joining
the faculty at the University of Rochester. Dr. Bennett serves the Company
in an advisory capacity as chairman of our Scientific Advisory Board.

Sherri Bale, Ph.D., FACMG joined the Company in September 2006,
when BioReference Laboratories acquired the operating assets of GeneDx. She
received her M.S. and Ph.D. degrees from the University of Pittsburgh, and her
post-doctoral training in medical genetics at the NIH. She is an American Board
of Medical Genetics-Certified Ph.D.  Medical Geneticist and Founding Member of
the American College of Medical Genetics. She founded GeneDx with Dr. John
Compton, also a long-time NIH scientist, after 16 years at the NIH. For the
past eight years, she has served as President and Clinical Director of GeneDx,
which specializes in developing and providing molecular diagnostic tests for
rare hereditary disorders. She has authored more than 125 peer-reviewed papers,
book chapters, and books in the field. She serves on numerous Boards of patient
advocacy and non-profit organizations, and is a member of the Faculty of the
Metropolitan Medical Genetics Training Program of the National Human Genome
Research Institute, NIH, in Bethesda, MD. She holds a second degree black belt
in judo.

John Compton, Ph.D., (Age 60) serves as Scientific
Director and Co-President of GeneDx Inc., the operating assets of which were
acquired by BioReference Laboratories in September 2006. He has 25 years
experience in the development and application of molecular biological
techniques to answer questions about genetics and epidermal differentiation,
and has authored more than 60 publications in the field. He holds B.S. degrees
in Physics and Biology from MIT, received his Ph.D. from the University of
California, Berkeley in Biophysics, and did his post-doctoral training in
protein-DNA interactions at the Baylor College of Medicine. Following six years
as an independent investigator at the Jackson Laboratory, he joined the
Laboratory of Skin Biology in the NIAMS at the NIH in 1991 where he was Staff
Scientist in the Genetic Studies Section until 2000, when he and NIH
colleague Sherri Bale formed GeneDx to develop and provide molecular genetic
testing in rare hereditary disorders. In 2003 they were jointly awarded the
Entrepreneur of the Year award by the Technology Council of Maryland. John is
also in his eighth year as Mayor of the Town of Washington Grove, MD.

Compliance with Section 16(a) of the Exchange Act

Based solely on a review of Forms 3 and 4 and any amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) under the
Securities Exchange Act of 1934, or representations that no Forms 5 were
required, we believe that with respect to fiscal 2008, our officers, directors
and beneficial owners of more than 10% of our equity timely complied with all
applicable Section 16(a) filing requirements.

Item 11  Executive Compensation

The table below summarizes the total compensation paid or accrued by us
with respect to the years ended October 31, 2007 and 2008 to our three
executive officers and to our two other most highly compensated senior
management employees during the period. All of our group life, health,
hospitalization or medical reimbursement plans, if any, as well as our 401(k) plan,
do not discriminate in scope, terms or operation, in favor of any or our
officers, senior management members or directors, and are generally available
to all salaried employees.

(1) Under
SEC disclosure rules, the term bonus does not include awards that are
performance based. As a result of this definition, payments under our 2007
Incentive Bonus Plan for Senior Management are not considered bonuses and are
reported under the column captioned Non-Equity Incentive Plan Compensation.

(2) The
2007 Senior Management Incentive Bonus Plan adopted by the Compensation
Committee provided for bonuses as a percentage of salary to be paid to
designated members of Senior Management (twelve in total) to the extent the
Companys Total Operating Income equaled certain designated percentages of
Total Net Revenues. The amounts in column (g) reflect the cash awards to
the named officers under the 2007 Senior Management Incentive Bonus Plan. No
bonuses were earned under the Plan with respect to fiscal 2008.

(3) The
amounts in column (i) All Other Compensation are detailed below.

20

Name

Personal Use of Company
Leased Automobile

Personal Use of
Company Airplane

Life Insurance
Premium (a)

Other

Total

Fiscal Year
2007

Marc D. Grodman

$

20,900

$

5,330

$

70,000

$

-0-

$

96,230

Howard Dubinett

15,070

-0-

25,000

-0-

40,070

Sam Singer

14,822

-0-

25,000

-0-

39,822

Richard Faherty

28,109

1,673

-0-

137,408

(b)

167,190

Charles Todd Jr.

9,385

799

-0-

-0-

10,184

Name

Personal Use of Company
Leased Automobile

Personal Use of
Company Airplane

Life Insurance
Premium (a)

Other

Total

Fiscal Year
2008

Marc D. Grodman

$

23,020

$

8,404

$

70,000

$

-0-

$

101,424

Howard Dubinett

15,070

-0-

25,000

-0-

40,070

Sam Singer

14,739

-0-

25,000

-0-

39,739

Richard Faherty

28,021

-0-

-0-

111,941

(b)

139,962

Charles Todd Jr.

9,937

3,179

-0-

-0-

13,116

(a) See
Split Dollar Life Insurance herein

(b) Mr. Faherty
rents an airplane to the Company (when the Companys owned airplane is
unavailable) for corporate flights. Such rentals totaled $71,108 in fiscal 2008 and $55,965 in fiscal
2007. In addition, a separate corporation of which Mr. Faherty is the
majority shareholder provided networking, data reporting and programming
services to the Company in fiscal 2008 and fiscal 2007 for which it received
$40,833 and $81,713 in compensation respectively.

Dr. Grodman
serves as our President and Chief Executive Officer pursuant to a seven-year
employment agreement which expires on October 31, 2011. Dr. Grodman
has the right to elect to cancel the employment agreement effective at the end
of any calendar month commencing October 31, 2008 on not less than 90 days
prior written notice, subject to a six month non-competition restriction. The
employment agreement is automatically renewable for additional two year periods
subject to the right of either party to elect not to renew at least six months
prior thereto. The employment agreement provides Dr. Grodman with minimum
annual base compensation of $750,000 subject to annual percentage increases to
the extent of annual percentage increases in the Consumer Price Index. Dr. Grodmans
minimum annual base compensation for fiscal 2009 as determined by the
Compensation Committee is $965,180. The Compensation Committee can but is not
required to increase Dr. Grodmans compensation at the end of any fiscal
year based upon his and the Companys performance. The employment agreement
also provides Dr. Grodman with business use of an automobile leased by the
Company and participation in any fringe benefit and bonus plans available to
the Companys employees to the extent determined by the Compensation Committee.
The employment agreement contains provisions governing in the event of Dr. Grodmans
partial or total disability and provides for termination for cause or in the
event of Dr. Grodmans death. Dr. Grodman has the right to terminate
the employment agreement in the event of a material change in his duties and
responsibilities, the relocation of the Companys principal executive offices
from Elmwood Park, New Jersey to a location more than fifty miles distant or a
material breach of the employment agreement by the Company (including a
reduction in Dr. Grodmans benefits under the agreement). In the event of
a Change in Control of the Company, Dr. Grodman can elect to terminate the
agreement. In that event, he will be entitled to be paid a lump sum Severance
Payment equal to 2.99 times the average of his annual compensation paid by the
Company for the five calendar years preceding the earlier of the calendar year
in which the Change of Control occurred or the calendar year of the Date of
Termination, subject to the provisions of Section 409-A of the Internal
Revenue Code. See Split-Dollar Life Insurance herein as to the Endorsement
Split-Dollar Life Insurance Agreement between the Company and Dr. Grodman.

Mr. Dubinett
serves as Executive Vice President and Chief Operating Officer pursuant to an
employment agreement which has been extended through October 31,
2009. Mr. Dubinetts minimum annual
compensation under the extended agreement is equal to his annual compensation
in fiscal 2002 and is subject to increases based on increases in the Consumer
Price Index as well as to increases at the discretion of the Compensation
Committee. Mr. Dubinetts minimum annual base compensation for fiscal 2009
as determined by the Compensation Committee is $381,425. The agreement provides
for (i) the leasing of an automobile for his use; (ii) participation
in fringe benefit, bonus, pension, profit sharing, and similar plans maintained
for the Companys employees; (iii) disability benefits; (iv) certain
termination benefits; and (v) in the event of termination due to a Change
in Control of the Company, a Severance Payment equal to 2.99 times Mr. Dubinetts
average annual compensation during the preceding five years, subject to the
provisions of Section 409-A of the Internal Revenue Code. See Split
Dollar Life Insurance herein as to the Endorsement Split Dollar Life Insurance
Agreement between the Company and Mr. Dubinett.

Mr. Singer
serves as Senior Vice President and Chief Financial Officer pursuant to an
employment agreement which has been extended through October 31, 2009, Mr. Singers
minimum annual compensation under the extended agreement is equal to his annual
compensation in fiscal 2002 and is subject to increases based on increases in
the Consumer Price Index as well as to increases at the discretion of the
Compensation Committee. Mr. Singers minimum annual base compensation for
fiscal 2009 as determined by the Compensation Committee is $381,425. The
agreement provides for (i) the leasing of an automobile for his use; (ii) participation
in fringe benefit, bonus, pension, profit sharing, and similar plans maintained
for the Companys employees; (iii) disability benefits; (iv) certain
termination benefits; and (v) in the event of termination due to a Change

21

in
Control of the Company, a Severance Payment equal to 2.99 times Mr. Singers
average annual compensation during the preceding five years, subject to the
provisions of Section 409-A of the Internal Revenue Code. See Split-Dollar
Life Insurance herein as to the Endorsement Split-Dollar Life Insurance
Agreement between the Company and Mr. Singer.

Mr. Faherty
serves as Chief Information Officer and Director of Information Services
pursuant to an employment agreement currently due to expire on October 31,
2011. Mr. Fahertys initial Base Compensation of $400,000 in fiscal 2005
is subject to increases based upon managements evaluation of his and the
Companys performance and is also subject to increases based on increases in
the Consumer Price Index. The agreement provides for (i) the leasing of an
automobile for Mr. Fahertys use; (ii) participation in fringe
benefit and bonus plans available to the Companys employees; (iii) disability
benefits; (iv) certain termination benefits; and (v) in the event of
termination due to a Change in Control of the Company, a Severance Payment
equal to 2.99 times Mr. Fahertys average annual compensation during the
preceding five years, subject to the provisions of Section 409-A of the
Internal Revenue Code.

Mr. Todd
serves as a Senior Vice President in Sales pursuant to an Employment Agreement
currently due to expire on October 31, 2011. Mr. Todds initial Base
Compensation of $350,000 in fiscal 2005 is subject to increases based upon
managements evaluation of his and the Companys performance and is also
subject to increases based on increases in the Consumer Price Index. The
agreement provides for (i) the leasing of an automobile for Mr. Todds
use; (ii) participation in fringe benefits and bonus plans available to
the Companys employees; (iii) disability benefits; (iv) certain
termination benefits; and (v) in the event of termination due to a Change
in Control of the Company, a Severance Payment equal to 2.99 times Mr. Todds
average annual compensation during the preceding five years, subject to the
provisions of Section 409-A of the Internal Revenue Code.

Potential
Payments Upon Termination or Change in Control as of October 31, 2008

The
following table sets out the payments that could be paid to each of our three
executive officers and to our two other most highly compensated senior
management employees upon termination of employment due to death, disability,
for Good Reason or a Change in Control, in each case occurring as of October 31,
2007.

Employee

Fiscal Year 2008

Disability(a)

Good Reason(b)

Death(c)

Change in Control(d)

Marc D. Grodman M.D.

$

1,366,300

$

2,732,600

$

7,861,374

$

2,253,250

Howard Dubinett

362,900

362,900

1,334,550

876,152

Sam Singer

362,900

362,900

768,295

877,175

Richard Faherty

486,500

1,459,600

243,300

1,170,738

Charles Todd, Jr.

505,200

1,515,700

252,618

973,093

(a) Dr. Grodmans
employment agreement entitles him to monthly compensation at his then current
Base Compensation for 18 months in the event of his Total Disability. The
employment agreement of each of the other employees listed in the table
entitles the employee to monthly compensation at his then current Base
Compensation for twelve months in the event of his Total Disability.

(b) Good
Reason entitling the employee to voluntarily terminate his employment
agreement includes assignment of duties inconsistent with his current duties,
reduction of his Base Compensation, relocation of the Companys principal
executive offices to a location more than 50 miles from the current location
and other breaches by the Company of the employment agreement. In the event of
his voluntary termination for Good Reason, each of the employees listed in
the table is entitled to be paid his monthly Base Compensation until completion
of his current Employment Period which is as follows: Dr. Grodman  until October 31,
2011; Messrs. Dubinett and Singer  until October 31, 2009; and Messrs. Faherty
and Todd  until October 31, 2011.

(c) Under
Dr. Grodmans employment agreement, his employment terminates in the event
of his death and his beneficiaries would be entitled to the death proceeds of
the insurance policy owned by the Company on his life after deducting the
Companys Interest in the Policy. In the event of Mr. Dubinetts death
or Mr. Singers death while employed by the Company, the decedents
beneficiaries would be entitled to the death proceeds of the insurance policy
owned by the Company on his life after deducting the Companys Interest in the
Policy plus additional payments equal to six months of his Base Compensation
in effect at the time of his death. See Split-Dollar Life Insurance herein.
In the event of Mr. Fahertys death or Mr. Todds death while
employed by the Company, the decedents beneficiaries would be entitled to
additional payments equal to six months of his Base Compensation at the time of
his death.

(d) In
the event of a termination of employment after a Change in Control of the
Company, the employee is entitled to receive a lump sum Severance Payment equal
to 2.99 times the average of his annual compensation paid or payable by the
Company in connection with his employment and included in his gross income as
compensation income for the five calendar years preceding the calendar year in
which the Change in Control occurred, subject to the provisions of Section 409-A
of the Internal Revenue Code

Pursuant
to the terms of their 1997 employment agreements, the Company had established
split-dollar life insurance programs for each of its three Executive Officers.
As a result of the passage of the Sarbanes Oxley Act of 2002 (signed into law
on July 30, 2002), these three programs were modified. Pursuant to the
modification, each of the three Executive Officers assigned ownership of his
policies to the Company and new policies were issued to replace the prior
policies with annual premiums under the new policies ($70,000 under Dr. Grodmans
policy and $25,000 each under Messrs. Dubinetts and Singers policies)
being equal to the premiums paid under the replaced policies. The Company has
now executed new Endorsement Split-Dollar Life Insurance Agreements with each
of its three Executive Officers. Pursuant to the new agreements, the Company
has agreed to continue to pay the annual premium on the policy on each officers
life during the period of his full-time employment by the Company. The Company
is the sole owner of the policy and of its net cash surrender value, and in the
event of the officers death while serving as a full-time employee of the
Company, the Company will be entitled to receive that amount of the death
proceeds equal to its interest in the policy (the aggregate amount of premiums
paid by the Company with respect to the policy less the amount of any loans, if
any, from the Insurer to the Company against the cash value or policy proceeds,
and less the aggregate amount of any premiums paid by the officer to the
Company in reimbursement of premiums paid by the Company) and the balance of
the death proceeds will be paid to the officers designated beneficiaries. The
premiums paid by the Company on the current policies and the prior policies
aggregated approximately $1,542,000 and $1,422 ,000 at October 31, 2008
and October 31, 2007, respectively. At those dates, the net cash surrender
value of the three current policies aggregated approximately $1,225,000 and
$1,054,000, respectively and is recorded on the books of the Company at these
values.

The 1989 Plan

In July 1989, the Companys Board of Directors adopted the 1989
Employees Stock Option Plan (the 1989 Plan) which was approved by
shareholders in November 1989. The
1989 Plan provided for the grant of options to purchase up to 666,667 shares of
Common Stock. Under the terms of the
1989 Plan, options granted thereunder could be designated as options which
qualify for incentive stock option treatment (ISOs) under Section 422 of
the Internal Revenue Code of 1986 (the Code), or options which do not so
qualify (NQOs).

Under
the 1989 Plan, the exercise price of an option designated as an ISO could not
be less than the fair market value of the Common Stock on the date the option
was granted. However, in the event an
option designated as an ISO was granted to a 10% shareholder (as defined in the
1989 Plan) such exercise price was required to be at least 110% of such fair
market value. Exercise prices of NQOs
could be less than such fair market value.
The aggregate fair market value of shares subject to options granted to
a participant which are designated as ISOs which first become exercisable in
any calendar year could not exceed $100,000. All options under the 1989 Plan
were required to be granted before the Plans July 1999 Termination Date
so that no further options can be granted under the 1989 Plan. At October 31,
2008, there were no outstanding ISOs under the 1989 Plan.

On
August 25, 2000, the Board of Directors adopted the 2000 Employee
Incentive Stock Option Plan (the 2000 Plan) reserving an aggregate 800,000
shares of Bio-Reference Common Stock for issuance upon exercise of ISOs which
may be granted under the 2000 Plan.
Stockholders ratified the adoption of the 2000 Plan at our December 14,
2000 Annual Meeting of Stockholders. During fiscal 2008, no options were
granted under the 2000 Plan. During fiscal 2008, ISOs issued under the 2000
Plan to purchase an aggregate 4,500 shares at exercise prices ranging from
$5.94 to $8.40 per share were exercised and as a result, at October 31,
2008, there were outstanding ISOs under the 2000 Plan exercisable to purchase
an aggregate 157,000 shares at exercise prices ranging from $5.52 to $15.334
per share.

The
2000 Plan authorizes the grant of options which qualify for ISO treatment under
Section 422 of the Code, to purchase up to a maximum aggregate 800,000
shares of the Companys Common Stock. Options may only be granted under the 2000
Plan to employees of the Company and its subsidiaries (including officers and
directors who are also employees).

The
2000 Plan is administered by the Board of Directors. The Board has the
discretion to determine the eligible employees to whom, and the price (not less
than the fair market value on the date of grant) at which options will be
granted; the periods during which each option is exercisable; and the number of
shares subject to each option. The Board has the authority to interpret the
2000 Plan and to establish and amend rules and regulations relating
thereto.

The
2000 Plan provides that the exercise price of an option granted thereunder
shall not be less than the fair market value of the Common Stock on the date
the option is granted. However, in the event an option is granted under the
2000 Plan to a holder of 10% or more of the Companys outstanding Common Stock,
the exercise price must be at least 110% of such fair market value. Under the
2000 Plan, options must be granted before the August 24, 2010 Termination
Date. No option may have a term longer than ten years (limited to five years in
the case of an option granted to a 10% or greater stockholder of the Company).
The aggregate fair market value of the Companys Common Stock with respect to
which options are exercisable for the first time by a grantee under the 2000
Plan during any calendar year cannot exceed $100,000. Options granted under the
2000 Plan are non-transferable and must be exercised by an optionee, if at all,
while employed by the Company or a subsidiary or within three months after
termination of such optionees employment due to retirement, or within one year
of such termination if due to disability or death. The Board may, in its sole
discretion, cause the Company to lend money to or guaranty any obligation of an
employee for the purpose of enabling such employee to exercise an option
granted under the 2000 Plan provided that such loan or obligation cannot exceed
fifty percent (50%) of the exercise price of such option.

On
June 3, 2003, the Board of Directors adopted the 2003 Employee Incentive
Stock Option Plan (the 2003 Plan) reserving an aggregate 800,000 shares of
Bio-Reference Common Stock for issuance upon exercise of ISOs which may be granted under the 2003
Plan. Stockholders ratified the adoption of the 2003 Plan at our July 31,
2003 Annual Meeting of Stockholders. During fiscal 2008, ISOs were granted
under the 2003 Plan exercisable to purchase 20,000 shares at an exercise price
of $34.99 per share. In fiscal 2008, ISOs issued under the 2003 Plan to
purchase 29,313 shares at exercise prices ranging from $12.22 to $21.46 per
share were exercised and ISOs granted under the 2003 Plan exercisable to
purchase 7,145 shares were canceled due to terminations of employment. As a
result, at October 31, 2008, there were outstanding ISOs under the 2003
Plan exercisable to purchase an aggregate 244,280 shares at exercise prices
ranging from $12.22 to $34.99 per share.

The
2003 Plan authorizes the grant of options which qualify for ISO treatment under
Section 422 of the Code to purchase up to a minimum aggregate 800,000
shares of the Companys Common Stock.
Options may only be granted under the 2003 Plan to employees of the
Company and its subsidiaries (including those officers and directors who are
also employees).

The
2003 Plan is administered by the Board of Directors. The Board has the discretion to determine the
eligible employees to whom, and the prices (not less than the fair market value
on the date of grant) at which options will be granted; the periods during
which each option is exercisable; and the number of shares subject to each
option. The Board has the authority to
interpret the 2003 Plan and to establish and amend rules and regulations
relating thereto.

The
2003 Plan provides that the exercise price of an option granted thereunder
shall not be less than the fair market value of the Common Stock on the date
the option is granted. However, in the
event an option is granted under the 2003 Plan to a holder of 10% or more of
the Companys outstanding Common Stock, the exercise price must be at least
110% of such fair market value.

Under the 2003 Plan, options
must be granted before the June 2, 2013 Termination Date. No option may have a term longer than ten
years (limited to five years in the case of an option granted to a 10% or
greater stockholder of the Company). The
aggregate fair market value of the Companys Common Stock with respect to which
options are exercisable for the first time by a grantee under all of the
Companys Stock Option Plans during any calendar year cannot exceed
$100,000. Options granted under the 2003
Plan are non-transferable and must be exercised by an optionee, if at all,
while employed by the Company or a subsidiary or within three months after
termination of such optionees employment due to retirement, or within one year
of such termination if due to disability or death. The Board may, in its sole discretion, cause
the Company to lend money to or guaranty any obligation of an employee for the
purpose of enabling such employee to exercise an option granted under the 2003
Plan provided that such loan or obligation cannot exceed fifty percent (50%) of
the exercise price of such option.

At
October 31, 2007, there were outstanding NQOs owned by one member of the
Scientific Advisory Board exercisable to purchase an aggregate 15,000 shares at
an exercise price of $7.94 per share. These NQOs expired unexercised in fiscal
2008.

At
October 31, 2007 and at October 31, 2008, there were no outstanding
options held by our three executive officers, the two other named most highly
compensated senior management employees or any of our directors.

During
Fiscal 2008 no options were exercised by any member of the Board of Directors.

During
fiscal 2008, each director who was not a Company employee was compensated for
his services as a director with a quarterly fee of $13,750. In addition, Gary
Lederman as chairman of the Audit Committee and John Roglieri M.D. as chairman
of the Compensation Committee was each compensated for serving as a Committee
Chairman with an additional quarterly fee of $2,750. No directors fees were
paid to our employee directors.

The
following table sets forth the compensation paid to our directors in fiscal
2008.

Through fiscal 2001, the Board of Directors, including the Companys
three executive officers, were responsible for reviewing the compensation paid
to the Companys executive officers, provided that none of the Companys executive
officers could vote with respect to his own compensation package. In fiscal
2002, the Company established a Compensation Committee consisting of three
non-employee directors, Morton L. Topfer (Chairman), Gary Lederman and John
Roglieri. Mr. Topfer resigned as a director and as a member of the
Compensation Committee in February 2004. In March 2004, Dr. Roglieri
became the Chairman of the Compensation Committee and Mr. Elias was
elected as a member of the Committee. Mr. Benincasa was elected as a
member of the Committee in June 2005.

In May 1997, the Company executed an employment agreement with Dr. Grodman
which expired on October 31, 2004.
Effective November 1, 2004, the Company executed a new seven year
employment agreement with Dr. Grodman, the terms of which are described
above. See Employment Agreements with Named Officers.

In May 1997, the Company also executed employment agreements with Messrs. Dubinett
and Singer (each expiring on October 31, 2002). During fiscal 2002, the
Compensation Committee authorized extensions of both Messrs. Dubinett and
Singers contracts for two additional years, with the Company having the option
to extend each agreement for two consecutive one-year periods in addition. In
consideration for Messrs. Dubinett and Singer executing the extension
agreements, the Company agreed that the base compensation during each extension
year would not be less than the total cash compensation paid to such individual
in fiscal 2002. The Companys option to extend Mr. Dubinett and Mr. Singers
employment agreements has been further extended through fiscal 2009.

In view of the fact that our three named executive officers own
substantial equity interests in the Company, our compensation program for them focuses
primarily on base salary, subject to annual increase based upon a review of the
executives and the Companys performance. In addition, to further incentivize
our executive officers as well as certain other members of senior management,
in 2005, we established a Senior Management Incentive Bonus Plan designed to
assist in the Companys profitability. Bonuses under the Plan are earned and
paid only to the extent the Companys Total Operating Income equaled certain
designated percentages of Total Net Revenues. Plan criteria were met with
respect to fiscal 2005 and 2007 so that bonuses were earned and paid, but no
bonuses were earned or paid under the Plan with respect to fiscal 2006 or
fiscal 2008 as the Plans targeted performances were not achieved.

During
the summer of calendar year 2004 with the knowledge that Dr. Grodmans
seven year employment agreement was due to expire in October 2004, the
Compensation Committee commenced negotiations with Dr. Grodman for the
terms of a new employment agreement. In the course of its negotiations, the
Committee took into account among other factors as a barometer of Dr. Grodmans
performance as the Companys chief executive officer, the substantial increase
since 1997 in the Companys net revenues, operating income and the market price
of the Common Stock. Another factor taken into account by the Committee was the
compensation being paid to the chief executive officers of a peer group of nine
other publicly owned clinical testing laboratories including the two major
companies in the industry, Quest Diagnostics, Inc. and Laboratory
Corporation of America Holdings. The terms of Dr. Grodmans split-dollar
insurance arrangement with the Company and the fact that the proposed new
employment agreement did not provide Dr. Grodman with additional equity
compensation was also taken into account. After discussion, each of the three
members of the Compensation Committee at the time (Dr. Roglieri, Mr. Elias
and Mr. Lederman) concluded that the terms of the proposed new employment
agreement were fair to and in the best interests of the Company and its
stockholders and that the proposed compensation thereunder was not excessive.

The
Compensation Committee has determined that the base salaries paid with respect
to fiscal 2008, and the terms of the extension agreements with Messrs. Dubinett
and Singer, were reasonable in relationship to the services performed, the
responsibilities assumed and the results obtained, and were in the best
interests of the Company. In connection with Dr. Grodmans compensation,
the Compensation Committee considered the Companys increase in net revenues,
patients serviced, working capital and shareholders equity in fiscal 2008
compared with the corresponding period in fiscal 2007. Furthermore, the
compensation paid to Messrs. Grodman, Dubinett and Singer for fiscal 2008
comports with the Compensation Committees perception of base compensation
levels of principal executives employed by other companies, both public and
private.

Our
policy is to provide health benefits as well as access to our 401(K) Plan
to which we contribute a maximum of $500 per employee each year, to all of our
employees including our three executive officers.

We
lease automobiles for their use but amounts reflecting their personal use are
reported as income to them subject to tax. Similarly, personal use of the
Company airplane by any of our executive officers is reported as income to
them, subject to tax. See Footnote (3) to the Summary Compensation Table.

Our
employment agreements with our three executive officers provide for substantial
Severance Payments to them in the event of a change in control of the Company.
This provision provides an additional level of financial security for our three
executive officers. These executives could well be asked to evaluate a
transaction purportedly expected to maximize shareholder value while resulting
in the elimination of their jobs. The Severance Payment provision (2.99 times
the annual average of the preceding five years of compensation) could help to
minimize the distraction caused by concerns over personal financial security in
the context of a proposed change in control.

The
Company grants stock options at an exercise price at least equal to the fair
market value on the date of the grant. Due to the substantial stock ownership
position of our three executive officers, no stock options have been granted to
them (or restricted stock awarded to them) in the last three years.

Section 162(m) of
the Internal Revenue Code generally disallows a tax deduction to public
corporations for compensation in excess of $1,000,000 paid for any fiscal year
to a corporations chief executive officer and to the four other most highly
compensated executive officers in office as of the end of the fiscal year. The
statute exempts qualifying performance-based compensation from the deduction
limit if certain requirements are met. However, shareholder interests may at
times be best served by not restricting the Compensation Committees discretion
and flexibility in developing compensation programs, even though the programs
may result in non-deductible compensation expenses. Accordingly, the
Compensation Committee may from time to time approve elements of compensation
for certain officers that are not fully deductible, although no such elements
have been approved to date.

During fiscal 2008, the members of the Companys Compensation Committee
were:

John Roglieri M.D.  Chairman

Joseph Benincasa

Harry Elias

Gary Lederman

No member of the Compensation Committee was an officer or employee of
the Company in fiscal 2008 or was formerly an officer of the Company.

25

Compensation Committee Report

The members of the Companys Compensation Committee hereby state;

(A)We have reviewed and discussed the
Compensation Discussion and Analysis contained in this Annual Report on Form 10-K
for the year ended October 31, 2008 with the Companys Management, and

(B)Based on such review and discussions, we have
recommended to the Companys Board of Directors that the Compensation
Discussion and Analysis be included in the Companys Annual Report on Form 10-K
for the year ended October 31, 2008

The following table sets forth information as of January 4,
2009 with respect to the ownership of Common Stock by (i) each person
known to us to be the beneficial owner of more than 5% of our outstanding
Common Stock, (ii) each of our directors, (iii) each of our executive
officers, and (iv) all directors and executive officers as a group.

Name and Address of

Beneficial Owner

Directors and

Shares of Common Stock

Percentage

Executive Officers*

Beneficially Owned(1)

Ownership

Marc D. Grodman(2)

1,503,104

11

%

Howard Dubinett(3)

310,872

2

%

Sam Singer(4)

132,416

1

%

Joseph Benincasa

-0-

0

%

Harry Elias

-0-

0

%

Gary Lederman(5)

27,200

**

John Roglieri(6)

5,000

**

Executive Officers

1,978,592

14

%

and Directors as a group

(seven persons)(2)(3)(4)(5)(6)

Other Greater than 5%

Beneficial Owner

Arbor Capital Management, LLC(7)

732,900

5

%

120 South Sixth Street

Minneapolis, MN 55402

*The address of all of the Companys directors
and executive officers is c/o the Company, 481 Edward H. Ross Drive, Elmwood
Park, New Jersey 07407.

**Less than one (1%) percent.

(1)Except as otherwise noted, each holder named
in the table has sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned.

On October 12, 2006, Dr. Grodman established a Rule 10b-5-1
Sales Plan (the Sales Plan) with Bear Stearns & Co., Inc. (Bear
Stearns) to facilitate sales of a variable number of Dr. Grodmans shares
of BRLI Common Stock (up to 200,000 shares) in variable pre-paid forward
transactions (Forward Transactions) at a minimum per share sale price as
specified in the Sales Plan. In connection with the contemplated Forward
Transactions, Dr. Grodman pledged 200,000 shares of his BRLI Common Stock
to secure his obligation to deliver a maximum aggregate 200,000 shares of
Common Stock to Bear Stearns on the final settlement dates (approximately 23-25
months after each sale). The Sales Plan was terminated on December 21,
2006 at which date an aggregate 175,936 shares had been sold pursuant to the
Forward Transactions. As prepayment for the pledge of these shares, Bear
Stearns paid Dr. Grodman approximately $3,950,000 or approximately $22.46
per share. The number of shares that Dr. Grodman will be obligated to
deliver on the final settlement dates will vary based upon the market prices of
the Common Stock on such settlement dates. Dr. Grodman will benefit from
any excess in the market prices of the Common Stock at the final settlement
dates to the extent such prices exceed approximately $25.30 up to approximately
$30.38 per share, by being able to deliver fewer shares. Until the final
settlement dates, Dr. Grodman is deemed the beneficial owner of the
pledged shares.

Based on the closing price for BRLI Common Stock on NASDAQ on November 18,
2008, the settlement date with respect to the first 66,666 shares of the
aggregate 175,936 shares sold, Dr. Grodman transferred 66,666 of the
pledged shares to Bear Stearns, now a division of J.P. Morgan, for which he had
received a prepayment of $1,497,343. The net effect to Dr. Grodman is that
on the initial settlement date, he sold 66,666 shares at a price of $22.46 per
share.

Based on the closing price for BRLI Common Stock on NASDAQ on December 18,
2008, the settlement date with respect to the second 66,666 shares of the
aggregate 175,936 shares sold, Dr. Grodman was obliged to deliver only
63,976 of the pledged shares to Bear Stearns for which he had received a
prepayment of $1,497,272. The net effect to Dr. Grodman is that on the
second settlement date, he sold 63,976 shares at a price of $23.40 per share.

(3)Includes 310,872 shares owned directly. In lieu of an outright sale, on October 15,
2007, Howard Dubinett entered into a pre-paid variable price forward sales
contract (Forward Contract) with UBS Securities LLC (UBS). Pursuant to the
Forward Contract, Mr. Dubinett pledged 89,047 shares of his BRLI Common
Stock to secure his obligation to deliver a maximum 89,047 shares of BRLI
Common Stock to

26

UBS on October 19, 2009 (the Settlement Date). As prepayment for
the pledge of these shares, UBS agreed to pay Mr. Dubinett $2,572,474 or
approximately $28.89 per share representing 87.9% of the proceeds from the sale
of 89,047 shares on October 16, 2007. The number of shares that Mr. Dubinett
is required to deliver on the Settlement Date varies based upon the price of
the Common Stock on the Settlement Date. Mr. Dubinett will benefit from
any excess in the price of the Common Stock on the Settlement Date between
$32.87 per share up to a maximum $39.44 per share by being able to deliver
fewer shares. Until the Settlement Date, Mr. Dubinett retains the voting
rights to the 89,047 pledged shares and is deemed the beneficial owner of such
shares.

(7)Arbor Capital Management, LLC (Arbor) in its
capacity as an investment advisor may be deemed the beneficial owner of these
732,900 shares which are owned by investment advisory clients. In its Schedule
13G filing dated February 5, 2008 filed with the Securities and Exchange
Commission, Arbor stated that to the best of its knowledge, these 732,900
shares were acquired in the ordinary course of business; were not acquired for
the purpose of and do not have the effect of changing or influencing the
control of the Company; and were not acquired in connection with or as a
participant in any transaction having such purpose or effect.

The
Companys independent directors as independence is defined by Rule 4200(a)(15)
of The NASDAQ Stock Market Rules are as follows:

Joseph
Benincasa

Harry
Elias

Gary
Lederman

John
Roglieri M.D.

They
also comprise all of the members of the Audit Committee, the Compensation
Committee and the Nominating Committee.

Item 14. - Principal
Accountant Fees and Services

The firm of MSPC, Certified
Public Accountants and Advisors, A Professional Corporation (MSPC) audited
our accounts and the accounts of our subsidiaries for the fiscal years ended October 31,
2008 and 2007. Moore Stephens and its predecessor firm have been our auditors
since 1988.

(1)Audit Fees

MSPC billed us approximately $235,120 for professional services rendered
in connection with the audit of our annual financial statements for the fiscal
year ended October 31, 2008 and the review of the financial statements
included in our quarterly reports on Form 10-Q for such fiscal year
compared to approximately $232,300 in billings for such services for the fiscal
year ended October 31, 2007. In addition, MSPC billed us approximately
$17,500 in fiscal 2008 for its audit of our 401(k) Plan for calendar year
2007 as compared to approximately $17,500 of such fees in fiscal 2007 with
respect to calendar year 2006.

(2) Audit-Related Fees

MSPC billed us approximately $15,750 for due diligence fees incurred in
relation to acquisitions during fiscal 2008 and approximately $97,750 for
Sarbanes-Oxley (SOX) related audit fees.

27

(3) Tax Fees

MSPC billed us approximately $72,500 for tax services for fiscal 2008
and approximately $46,900 for tax services for fiscal 2007.

(4) All Other Fees

No fees were billed to us by MSPC with respect to fiscal 2008 or fiscal
2007 other than for services described in Item 14 (1), (2) and (3) herein.

(5)Pre-Approval Policies and Procedures

The engagement of MSPC to render the above audit and tax services was
approved by our audit committee prior to the engagement.

28

PART IV

Item 15. 

Exhibits and Financial Statement Schedules

(a)1.

Financial Statements

The following financial statements of the Company are included in Part II,
Item 8